Inditex gets RBC upgrade to Outperform with €52 price target

RBC Capital Markets upgraded Inditex to Outperform from Sector Perform and raised its price target to €52 from €49, citing market share gains and easing cost pressures across the fashion sector.

The upgrade comes after RBC hosted a European consumer and retailing conference in London last week, where the broker came away more upbeat on consumer trends and the cost outlook for both goods and operating expenses.

"Inditex's quick product turnarounds, growing use of digital media and influencers, and push for more sustainable fabrics are powering its gains while competitors lag behind," RBC said in a note.

The broker now expects Inditex's gross margin to top forecasts and sees free cash flow rebounding after investments in technology and automation. RBC raised its earnings and revenue estimates for the Zara owner through 2028, noting the company's valuation sits at a reasonable level relative to other global fashion giants.

The upgrade is part of a broader positive view on European retail following the conference. RBC also flagged strong potential for consensus earnings upgrades at Next PLC, while taking a less optimistic stance on Primark owner Associated British Foods, where it sees much less scope for upgrades.

On costs, RBC said raw material prices including cotton, polyester and lumber have fallen back following the Iran conflict ceasefire, easing pressure on fashion retailers. That should mean industry-wide apparel inflation of 3% to 4% next spring, rather than the 8% feared a few months ago. Freight rates were the main offset, having risen again as shippers frontload cargo ahead of peak season, pushing spot rates to their highest in 18 months. UK labour costs were also seen abating, with this year's minimum wage rise of around 4% much closer to general wage growth than in recent years.

The upgrade signals that Inditex's operational advantages — including its tech-driven supply chain and early sustainability investments — are translating into financial outperformance even as the broader retail environment faces uncertainty. Investors will watch Inditex's next quarterly results for evidence of margin expansion and continued market share gains.

This article is for informational purposes only and does not constitute investment advice.