Inditex, the world's largest clothing retailer, will experience slower growth in the next three years but will still be far ahead of major competitors like Hennes & Mauritz (H&M), according to one analyst.
The owner of Zara posted a 22 percent rise in 2012 profits to 2.4 billion euros ($3.13 billion) on Wednesday, but the shares dropped 2.8 percent in Madrid as analysts warned of slowing growth given a lower than expected fourth quarter performance.
"Nothing has changed," countered Allegra Perry of Cantor Fitzgerald. "This is a company which has revolutionized clothing retail and the model is very, very strong.They have a big competitive advantage which continues to get bigger, with high barriers to entry. If in the last three years we've seen a CAGR (Compound Annual Growth Rate) of earnings growth of about 20 percent, I think going forward, for the next three years, that's going to be more like 15 percent."
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"That level of growth was always going to be unsustainable over the longer term. That said, I think you're still looking at a solid growth for the next few years."
Perry said Inditex is still a lot stronger structurally than its main rival Sweden-listed H&M, which is why it remains a safe investment in the retail sector. Perry cites supply chains as key to the dominance of Inditex.