Last Friday, 23 February, was a black day for the Spanish company Inditex, the world's largest fashion group. Share prices in the company fell 7.06%, its worst performance since 2009. Put another way, the company lost 5.92 billion euros in value. The price of a share in the company is now 25 euros, its lowest value in three years. It is a setback for the multinational, which has revealed that its financial forecasts for the fiscal year ending in January had been overly optimistic.
This is the company's worst economic performance in a decade. Not the surprise victory for Brexit in the UK referendum, the unanticipated election win for President Donald Trump in the US nor the jihadist terrorist attacks in several European cities - Barcelona and Cambrils included - have had such a dramatic effect on the Galician company than the events of the last year.
Things started to worsen for the group, founded by Amancio Ortega, during the middle of the financial year when JP Morgan lowered the share price forecast on the company by 6.5%. From then on the group's share price began to fall rapidly.
After these falls in share price the company admitted in a conference that sales figures in the last fiscal quarter, which in its case finished at the end of January, would be worst than those of the previous year. Specifically, the market estimated that the fall would be between around 4 and 4.5%. The company's pre-tax profits are also estimated to have fallen by around 10%. Furthermore, the company will likely suffer from an increase in the value of the euro.
Although shareholders will have to wait for the release of the official figures from the company on 14 March, it's certain that these pessimistic projections will have a significant effect on the market. In spite of everything, the fall looks like it is bottoming out and the share price will stabilise. Whatever happens, the effects will be felt across the industry, with other textile giants like H&M also being affected. In fact, clothing sales generally were lower in autumn due to the high temperatures, which reduced the number of clothes sold.
Another effect of the fall is an increase in the number of discounted garments, which will have an effect on the company's margins. Experts estimate that the worse figures for last quarter will lead to lower sales at catalogue price (without a discount).
These poor results are indicative of the Ibex-35 index as a whole, which was down over 9% in February.