ITX - Initiating Coverageind.millenniumbcp.pt/.../Documents/Retail/Inditex_retail_100613.pdf · For Inditex, speed is the No. 1 priority, above and beyond production costs. Vertical

Initiating Coverage

Buy (Medium Risk) TargetYE13(€): 110.10

FinancialsTurnover (€ mn) 13,793.0 15,946.0 17,696.1 19,607.8

EBITDA (€ mn) 3,257.7 3,913.0 4,291.6 4,853.2Net Income (€ mn) 1,932.0 2,361.1 2,644.9 3,010.9EPS (€) 3.10 3.79 4.24 4.83

CEPS (€) 4.29 5.08 5.53 6.23

RatiosPre-tax RoIC (%) 63.6 71.1 72.4 74.3RoE (%) 26.1 28.0 27.5 27.4

Net Debt/EBITDA (x) -1.1 -1.0 -1.1 -1.2Net Debt/Equity (%) -46.8 -48.3 -50.2 -51.4ValuationP / E (x) 20.4 27.9 23.6 20.7

EV / Revenues (%) 261.2 387.2 325.4 289.6

EV / EBITDA (x) 11.1 15.8 13.4 11.7Dividend Yield (%) 2.8 2.1 2.6 2.9Source: Millennium investment banking

2014E2012 2013E2011

Price: €100.05

Market Cap: €62364.2mn Reuters: ITX. MC Reuters:

No. Shares: 623.3mn Bloomberg: ITX SM Bloomberg:

95

110

125

140

155

170

Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13

Inditex

IBEX 35

A v . Jo sé M a l h o a , 2 7 – 5 1 0 9 9 - 0 1 0 L i sb o a T e l e p h o ne + 3 5 1 2 1 0 0 3 7 8 0 0 F a x + 3 5 1 2 1 0 0 3 7 8 0 9

� We have started the coverage of Inditex, with a YE13 price target of

€110.10 per share, with a Buy (Medium Risk) recommendation, meaning

an 10% upside. Overall, we believe Inditex benefits from a solid strategy

(consistent business plan) while keeping costs control and showing a

strong B/S. Furthermore, stock correction in 2013 (c.-5% Ytd) led to

multiples contraction, reducing its “premium multiple” profile. The success

of Inditex lies in its unique business model, which consists of flexibility, a

complete centralisation and vertical integration of its manufacturing and

distribution processes.

� We are assuming a CAGR 12-15 for consolidated sales of 10.8%, based

on an estimated 2% LfL sales (2013-15). Recall CAGR 07-12 was 11.1%

while it is estimated CAGR 15-23 9.2%. We highlight Inditex expects LfL

sales will be below 4% in 2013, probably reflecting an increasing tough

market in Spain (21% of total sales in 2012). Zara is expected to keep as

Inditex`s growth driver.

� We estimate Inditex will open 451 stores in 2013 (440-480 company

guidance). We highlight estimated space growth is 9% in 2013, in line with

company guidance (8%-10%) which is a more important number than

stores openings. Company expects space growth to increase 8%-10% up

to 3-5 years in line with our estimates (8.8%). Recall CAGR 07-12 was

10.6% while it is estimated CAGR 15-23 6.4%.

� Following strong numbers in 2012 (59.8%, + 0.5pp) we estimate Gross

Margin in 2013 will decline to 2011 levels (59.3%), penalized by lower

estimated LfL sales numbers while it is expect to recover in the following

years.

� EBITDA Margin is estimated to decline, penalized by lower Gross Margin,

high costs linked to new store openings and slower growth in Spain. We

highlight EBITDA CAGR 07-12 12.7%; 12-15 11.9% and 15-23 10.1%.

� We estimate Capex will reach €1.163mn in 2013 in line with Inditex

guidance (€1.2Bn). Recall 2012 Capex number (€1.6Bn) includes €245mn

from a major flagship store in London. We expect Capex to Sales

(excluding extraordinary Capex) will be c.6%, in line with historical

numbers.

� Inditex will disclose 1Q13 Earnings on June 12nd before market opens. A

Conference Call will be held on June 12nd, at 08:00 am, London time. We

expect sales increase will slowdown to 5% YoY to €3.602mn, penalized

by: i) 2012 was a leap year; c1% negative effect; ii) c2% negative

currency effect; iii) estimated LfL1%. Gross margin is expected to decline

75pb to 59.5% while EBITDA margin is estimated to decline to 20.8%.

João Flores + 351 21 0037830

[email protected].

RETAIL

SPAIN

1

0 Ju

ne

2013

Inditex The “It girl” stock

2

Millennium investment banking 10 June 2013

Contents

Executive Summary 3

Company Description 4

Retail formats 6

Strategy 8

Valuation 10

Sales estimates 14

Stores divisional estimates 15

Net sales, Gross margin evolution 18

Share Price charts 19

Peer Multiples 22

Historical Multiples 23

Consolidated Estimates 26

Quarter Evolution 27

Disclosures 30

3


Executive Summary

New valuation

We have started the coverage of Inditex, with a YE13 price target of €110.10 per share, with a Buy (Medium Risk)

recommendation, meaning an 10% upside. Overall, we believe Inditex benefits from a solid strategy (consistent

business plan) while keeping costs control and showing a strong B/S. Furthermore, stock correction in 2013 (c.-

5% Ytd) led to multiples contraction, reducing its “premium multiple” profile (page 23).

Overall, our estimates are based on Inditex guidelines and track record (CAGR 07-12). Inditex`s valuation triggers

are space growth and Gross margins. We believe there is still plenty scope to expand in Emerging countries and

online retail.

Company description: design, manufacture and sale of clothing

Inditex is one of the world’s largest fashion retailers, based on a global multi-concept growth and characterized by

a strong business model execution. The Group also encompasses more than 100 companies engaged in a range

of activities in the textile and fashion design, manufacturing and distribution businesses. Its unique management

business model, based on innovation and flexibility, and its vision of fashion (creativity and quality design,

together with a rapid response to market demands) have enabled its rapid international expansion and excellent

performance at its commercial concepts.

The company is headquartered in A Coruña (northwest Spain) where the Group’s business began and employs

more than 120.000 people. Group founder Amancio Ortega opened the first Zara outlet in 1975 and the first store

outside Spain opened in Portugal (Oporto) in 1988. As of the end of 2012, Inditex was operating 6009 stores in 86

countries.

The group’s home country, Spain, accounts for about 21% of sales; the rest of Europe accounts for 45%; the

Americas 14%; and countries outside these regions 20%.

Retail formats

Inditex's broad brand portfolio, which comprises eight banners, serves to reduce risk and refine the company's

targeting of specific consumer groups. Inditex's multi-brand strategy has helped it broaden its customer base. The

group comprises fashion chains Zara, Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and

Uterqüe .

Zara is the most important of all the Group brands, which was the first to be created. It is specialised in men,

women and children wear: ii) Massimo Dutti is focused on young men and women who look for quality and want

to look more forma; iii) Pull & Bear is developed for younger’s who prefer a casual way of dressing; iv) Bershka

appeals to the youngest target market; v) Stradivarius style for young disco-girls; vi) Oysho sells the latest fashion

trends in women's lingerie and intimate apparel; vii) Zara Home specialises in home decor and linens; viii) Uterqüe

sells accessories, fashion extras and a carefully-chosen selection of top-quality fabric and leather garments .

4


Company Description

i) Vertical integration

The Inditex business model is characterised by a high degree of vertical integration, with the company owning

production facilities in Europe, mostly in Spain. It is involved in all stages of the fashion process: design,

manufacture, logistics and distribution to its own managed stores. It has a flexible structure and a strong

customer-centric focus across all of its business areas.

The key element for the corporation is the store, a carefully designed space designed to make customers

comfortable as they experience the collections. It is also where company obtain useful information for adapting

collections to customers’ tastes in the shortest time possible

Company restricts about half of its sourcing to markets closer to its Spanish home base (Morocco, Portugal) which

has reduced Inditex’s exposure to wage inflation in Asia. Inditex's manufacturing facilities remain centred on its

domestic market. Recall production comes 50% from Iberia, 15% from Turkey and 35% from Asia (mainly China)

thus Inditex is less exposed to rising costs in Asia.

A significant share of manufacturing is done at the Group’s own factories, which primarily produce the most

fashion-forward garments. The Group directly controls fabric supply, marking and cutting and the final finishing of

garments, while subcontracting the garment-making stage to specialist firms located predominantly in the

northwest region of the Iberian Peninsula. The Group’s outside suppliers, a high percentage of which are

European, generally receive the fabric and other elements necessary for making garments from Inditex.

ii) Flexibility, speed

For Inditex, speed is the No. 1 priority, above and beyond production costs. Vertical integration enables company

to shorten turnaround times and achieve greater flexibility, keeping merchandise stock and fashion risk at a

minimum. Inditex produces fast fashion with an exceptionally quick turnaround of 14 days. For Inditex, the key

competitive advantage lies in being able to adapt product offering rapidly to keep its offer fresh, with new items

received by stores up to twice in one week (which outweighs the cost/benefit of outsourcing production in low

labour markets).

All merchandise, irrespective of origin, is delivered to each concept’s distribution hubs, from whence it is

distributed simultaneously to all stores worldwide on a very frequent and continuous basis. Deliveries arrive in

stores twice weekly and always contain new styles, to ensure that store collections are constantly refreshed and

updated. The logistics system, based on software designed by the company’s in-house teams, guarantees that

the time between when orders are received at distribution centres and when merchandise is delivered to stores is

on average only 24 hours for European stores and no more than 48 hours for American and Asian stores.

iii) Design

The success of Inditex’s collections lies in its ability to spot and adapt to rapidly changing trends in fashion,

designing new items constantly to satisfy customers’ cravings. Inditex uses its flexible business model to adapt to

changes occurring within each season, reacting swiftly to deliver new product to stores in the shortest time

possible.

5


The merchandise for each season -over 30,000 items last year- are developed in their entirety by creative teams

at each concept. More than 300 designers draw their main inspiration from both prevailing trends in the fashion

industry and customers themselves, through feedback received from stores.

Inditex has been able to meet the rapidly changing demand prevalent in fashion retailing and to adjust their

product ranges, thanks to efficient logistics and strict cost control. The company places a strong emphasis on

involving consumers in the development of its product offer, with stores collecting information and sending it to

design centres and commercial departments. This type of fashion manufacturing has meant that any jump in price

is less noticeable to consumers as many items are non-comparable.

iv) diversification

It is less reliant than its peers on cotton to make up its clothing ranges, thus less penalized from higher raw

material prices.

Inditex is also less reliant on Europe for the bulk of sales (where consumer spending on discretionary items is

sluggish, thus more focused on price) opening stores in markets as diverse as Kazakhstan and Chile and

becoming the first European fashion giant to implement a strategy for the southern hemisphere. H&M’s desire to

keep prices low seemed prudent given that its retail operations are concentrated in Europe. This ambitious

international growth should enable the latter group to offset less favourable market conditions in its domestic

market due to the downturn in the Spanish economy.

Inditex has also been less exposed to rising youth unemployment in Europe because it offers eight brands aimed

at different population segments. Its flagship brand Zara, offering high fashion designs combined with sharp

tailoring, has an extremely wide target market, while brands like Bershka and Pull & Bear compete with H&M for

the youth market.

v) Stable shareholder`s structure

# SharesEconomic

StakeVoting Rights

Management (direct stakes) 369,600,063 59.29% 59.29%Gartler SL * 311,727,598 50.01% 50.01%

Partler 2006 SL * 57,872,465 9.28% 9.28%

Institucional Investors 235,399,778 37.76% 37.76%Individuals 18,330,559 2.94% 2.94%Own Shares 0 0.00% 0.00%

Total Shares 623,330,400

Voting Shares 623,330,400

*held by Mr. Amancio Ortega (Chairman and founder of Inditex). He is the majority shareholder

of the company wherein he owns 396,600,063 shares through Gartler, S.L. and Partler 2006, S.L.

Source: Company data; Millennium investment banking

6


Retail Formats

In order to segment its approach to the market, Inditex owns several fashion concepts, which share the same

commercial and managerial focus: to be leaders in their niches through a flexible business model and

international reach. However, each concept has great leeway for managing its business; management teams are

independent in retail decision-making and in their ability to administer their resources.

Nonetheless, the fact that they belong to a Group operating in 86 markets (2012 YE) provides a great number of

organisational and knowledgemanagement synergies. Each management team can thus concentrate on

developing its business in the knowledge that certain support elements are covered by the Group’s accumulated

experience.

Inditex, as the parent company, is responsible for central corporate services, i.e. services shared by the eight

concepts and which facilitate international growth: administration, the use of logistics technology, general HR

policy, legal issues, and financial capacity, among others.

ZARA (www.zara.com) opened its first store in 1975 in A Coruña (Spain). It now operates in 86 markets with a

network of more than1700 stores ideally located in major cities. Its international presence clearly shows that

national borders are no impediment to a shared fashion culture. With a creative team of more than 200

professionals, Zara’s design process is closely linked to the public. Information travels from stores to design

teams, conveying customers’ requests and concerns.

The vertical integration of activities (design, production, logistics, and sales in the company’s own stores) means

that Zara is flexible and fast in adapting to the market. Its model is characterised by constantly updated

merchandise: new garments land in stores twice weekly. Zara pays special attention to the design of its stores,

shop windows and décor, and sites them in the best locations in major shopping areas. Its central services base is

in Arteixo (A Coruña).

PULL&BEAR (www.pullandbear.com) was founded by the Inditex Group in 1991. From its inception, the brand

has been skilled at adapting to the needs of young people, and has become a benchmark for casual, laidback

clothing. Pull&Bear aims to be something more than just a store. In addition to clothes and accessories, it offers

special spaces in the stores in which display fixtures are combined with vintage elements to create the kind of

environment that young people enjoy.

Pull&Bear has more than 810 stores in 59 markets. It is headquartered in Narón (A Coruña).

MASSIMO DUTTI (www.massimodutti.com) was founded in 1985 and acquired by Inditex in 1991. It now has

more than 630 stores in 60 markets. Massimo Dutti offers quality international fashion for men, women and

children, with a variety of collections ranging from sophisticated urban fashions to casual wear. It is headquartered

in Tordera (Barcelona).

7


BERSHKA (www.bershka.com) was founded in 1998 as a new store and fashion concept, targeting the young

female market. Since 2002 it has also sold men’s fashion. Bershka stores are large and spacious with a cutting-

edge look. They are meant to be meeting points for fashion, music and street art. The brand has more than 880

stores in 62 markets. It is based in Tordera (Barcelona).

STRADIVARIUS (www.e-stradivarius.com) acquired by Inditex in 1999, offers the latest trends in design, fabrics

and accessories to a young female target market. Its spacious stores (over 780 in 52 markets) have a modern,

dynamic design and offer a wide range of fashion options, with a casual and imaginative style. Its head office is in

Sallent (Barcelona).

OYSHO (www.oysho.com) launched in 2001. This concept brings the philosophy of the Inditex Group to the

women’s lingerie and intimate wear market, offering the latest trends with quality products at reasonable prices. It

has more than 520 stores in 35 markets. Its headquarters is in Tordera (Barcelona).

ZARA HOME (www.zarahome.com) is the seventh Inditex Group brand. It specialises in home furnishings,

namely textiles such as bed, table and bath linens, in addition to tableware, cutlery, glassware and decorative

items. Zara Home offers design, quality and innovation at attractive prices. It has more than 350 stores in 35

markets. It is based in Arteixo (A Coruña).

UTERQÜE (www.uterque.es) is the latest Inditex Group concept. Uterqüe sells accessories –handbags, footwear

and leather goods, jewellery and other accessories such as shawls, eyewear, umbrellas and hats, together with a

select range of garments and leather clothing. Uterqüe has more than 90 stores in 18 markets. The stores have

an elegant look, with areas designed to appear functional while providing maximum customer comfort.

2012 Numbers

% ZaraPull and

BearMassimi

DuttiBerska Stradivarius Oysho Zara Home Uterque

Turnover 10541 1086 1134 1485 961 314 350 74 % total 66.1% 6.8% 7.1% 9.3% 6.0% 2.0% 2.2% 0.5%Number of Stores 1925 816 630 885 780 524 357 92 % total 32.0% 13.6% 10.5% 14.7% 13.0% 8.7% 5.9% 1.5%

Source: Company data and Millennium investment banking

8


Strategy

The world's largest clothing retailer, Inditex, keeps showing growing numbers, fuelled by rapid international

expansion and fashionable collections. Inditex's strategy of diversifying its sales worldwide continues to pay

dividends, reducing its exposure to the difficult European market. The success of Inditex lies in its unique

business model, which consists of flexibility, a complete centralisation and vertical integration of its manufacturing

and distribution processes.

Retail at company stores

Both interior and exterior store design are given the highest priority. Shop windows play a major role, acting as an

advertising vehicle for Inditex`s concepts in the world’s major shopping streets. As for interior design, the intent is

to create a well-lit space where the clothes take pride of place, eliminating all barriers between garments and

customers.

In smaller or culturally different markets, the Group has expanded its store network through franchise agreements

with leading local retail companies. At the end of 2012, it had 763 franchised stores out of a total of 6009 stores

(12.7% of total stores).

The main characteristic of the Inditex franchise model is the total integration of franchised stores with own-

managed stores in terms of product, human resources, training, window dressing, interior design, logistics

optimisation, etc. This ensures standardised store management practices and a global image from the viewpoint

of customers worldwide

The stores in the front line are not the end of the process, it is the beginning, representing a vehicle for gathering market information, sending feedback to design teams and reporting on trends requested by customers. The feedback they send to the company’s headquarters in A Coruña, which includes both computerized sales data and anecdotal observations, drives the design process.

Central to Inditex’s growth strategy is the complete control over the chain of production. It takes, on average, just three weeks for Inditex to move a fashion piece from the concept stage to store shelves—and then items remain in stores only a few weeks before being replaced with the “latest” style, giving customers incentive to visit often and check out new arrivals. Relatively low prices also keep merchandise moving and customers coming back.

9


International Expansion

Inditex expands its business model in markets with attractive ling-term returns through its multi-concept and multi-

channel strategy. The first Zara store opened in A Coruña (northwest Spain) in 1975. Over the following decade

Zara continued to open stores throughout Spain. It debuted in Oporto (Portugal) in 1988, and in the next few

years, the first stores opened outside of the Iberian Peninsula, in New York (1989) and Paris (1990).This began a

process culminating in current presence in 86 markets worldwide. Its success, among people, cultures and

generations which, despite their differences, all share a special fondness for fashion, lies in the conviction that

national frontiers are no impediment to sharing a fashion culture.

The usual way of entering a new market is to start with a small number of stores, which test the waters in each

country before attaining a critical mass of customers. The new concepts added to the Group since 1991 share the

same international approach as Zara -in fact, it is of their fundamental characteristics. As a result, all brands have

expanded simultaneously in Spain and abroad. In most cases, Zara was the first concept to disembark in new

countries, gaining experience that facilitates the subsequent rollout of the other concepts. This accumulated

experience has also enabled the accelerated international expansion of the newer concepts.

Trend: Retail Online

Inditex already started online sales in selected markets. Competition is likely to intensify for clothing and footwear

sales through Internet retailing. The success of pure Internet retailer ASOS in the UK indicates that Internet

retailing for clothes has strong potential, with customers increasingly prepared to order clothes online. Meanwhile,

grocery retailers such as Tesco and Wal-Mart are also driving sales of non-food products through Internet

retailing, and competing against the likes of H&M at the low end of the price scale.

1Q13 Earnings

1Q13: Inditex will disclose 1Q13 Earnings on June 12nd before market opens. A Conference Call will be held on

June 12nd, at 08:00 am, London time. We expect sales increase will slowdown to 5% YoY to €3.602mn,

penalized by: i) 2012 was a leap year; c1% negative effect; ii) c2% negative currency effect; iii) estimated LfL1%.

Gross margin is expected to decline 75pb to 59.5% while EBITDA margin is estimated to decline to 20.8%.

10


Valuation

� Overall, our estimates are based on Inditex guidelines and track record (CAGR 07-12).

� We are assuming a CAGR 12-15 for consolidated sales of 11.5%, based on an estimated 2% LfL sales

(2013-15). Recall CAGR 07-12 was 11.1% while it is estimated CAGR 15-23 9.2%. We highlight Inditex

expects LfL sales will be below 4% in 2013, probably reflecting an increasing tough market in Spain (21% of

total sales in 2012 from 25% in 2011). Zara is expected to keep as Inditex`s growth driver. The contribution

of the franchises represents around 15% of total sales.

� Openings: We estimate Inditex will open 451 stores in 2013 (440-480 Inditex guidance). We highlight

estimated space growth is 9% in 2013, in line with company guidance (8%-10%) which is a more important

number than stores openings. Recall company expects space growth to increase 8%-10% up to 3-5 years

in line with our estimates (8.8%). Recall CAGR 07-12 was 10.6% while it is estimated CAGR 15-23 6.4%.

� Gross Margins: Following strong numbers in 2012 (59.8%, + 0.5pp, benefiting from positive sales

performance flexible business model, sustained commercial policies) we estimate Gross Margin in 2013 will

decline to 2011 levels (59.3%) penalized by lower estimated LfL sales numbers. We expect higher margins

to the following years (page 23), benefiting from higher scale and efficient management and costs control.

Gross Margi is a global figure with many different elements involved (markups, markdowns, fashion trends,

currencies,...) which it`s very much helped by the LfL sales growth evolution.

� EBITDA Margins: number is estimated to decline, penalized by lower Gross Margin, costs linked to new

store openings and slower growth in Spain. Recall the main driver in operating expenses is space growth,

including all the start-up costs for new openings and the roll-out of online sales. Production comes 50%

from Iberia, 15% from Turkey and 35% from Asia (mainly China) thus Inditex is less exposed to rising costs

in Asia. We highlight Inditex's net margins level is robust and comparable to H&M's numbers. The high level

of margins of the two groups should ensure that they are in a position to continue investing in network

expansion at a rapid pace. We highlight EBITDA CAGR 07-12 12.7%; 12-15 11.9% AND 15-23 10.1%.

� Net financials: We highlight Inditex is cash positive, in order to be more flexible in its strategy and take

advantage of good opportunities (recall company strategy to have flagship stores in major cities which is

only possible whit a strong B/S) while it is not expected it will pay a huge special dividend (conservative

dividend`s policy).

Inditex has a natural match, since its source in euros around 65% of total and sell in euros more or less

70% of total. So, there is not a significant currency impact in the Gross Margin over the year. The higher

revenues coming from non-euro countries (America and Asia) will probably reduce net short position in

dollars and increase the natural match (via reducing percentage sales in euros).

� Capex: We estimate ordinary Capex will reach €1.163mn in 2013 in line with Inditex guidance (€1.2Bn).

Recall 2012 Capex number (€1.6Bn) includes €245mn from a major flagship store in London. We expect

Capex to Sales (excluding extraordinary Capex) will be c.6%, in line with historical numbers.

� Tax Rate: We estimate Effective tax rate will reach 24.5%, in line with Inditex guidance (24%-25%).

� Dividends: We estimate a 50.5% ordinary payout (Inditex`s guidance c50%) while we expect company will

keep distributing special dividends (5% pay-out) given its strong B/S.

11


% 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2023E

CAGR 07-12

CAGR 12-15

CAGR 15-23

Consolidated Sales 9435 10407 11084 12527 13793 15946 17696 19608 21690 23961 26474 29109 31845 34699 43889 11.1% 10.8% 9.2% Zara sales 6264 6824 7077 8088 8938 10541 11749 13103 14613 16247 18012 19867 21818 23868 30546 11.0% 11.5% 9.7% Zara (% total sales) 66% 66% 64% 65% 65% 66% 66% 67% 67% 68% 68% 68% 69% 69% 70% Non-Zara sales 3171 3583 4007 4439 4855 5405 5947 6505 7076 7714 8463 9242 10028 10832 13344 11.3% 9.4% 8.3%Consolidated Sales Growth % 15.1% 10.3% 6.5% 13.0% 10.1% 15.6% 11.0% 10.8% 10.6% 10.5% 10.5% 10.0% 9.4% 9.0% 7.8%

LfL sales 5.0% 0% 0% 3% 4% 6% 2% 2% 2% 3% 3% 2% 2% 2% 2%

Space (sqm) 1,914,494 2,180,889 2,348,708 2,587,647 2,838,980 3,161,448 3,446,736 3,748,553 4,068,519 4,395,985 4,730,951 5,066,233 5,396,740 5,725,458 6,681,458 10.6% 8.8% 6.4%

Space Growth % 15.5% 13.9% 7.7% 10.2% 9.7% 11.4% 9.0% 8.8% 8.5% 8.0% 7.6% 7.1% 6.5% 6.1% 4.9%

Sales / Sqm (€/m2) 4.928 4.772 4.719 4.841 4.858 5.044 5.134 5.231 5.331 5.451 5.596 5.746 5.901 6.061 6.569 0.5% 1.9% 2.6%

€/m2 Growth % 0.1% -3.2% -1.1% 2.6% 0.4% 3.8% 1.8% 1.9% 1.9% 2.2% 2.7% 2.7% 2.7% 2.7% 2.7%

# Stores 3691 4264 4607 5044 5527 6009 6460 6923 7409 7900 8396 8900 9389 9871 11249 10.2% 7.2% 5.4%

Stores Openings 560 573 343 437 483 482 451 463 486 491 496 504 489 482 452 -3.0% 0.3% -0.9%

Number of countries with stores 68 73 74 79 82 86

Gross Profit 5349 5914 6328 7422 8180 9529 10529 11686 12970 14377 15911 17524 19203 20958 26641 12.2% 10.8% 9.4%

Gross Margin % 56.7% 56.8% 57.1% 59.2% 59.3% 59.8% 59.5% 59.6% 59.8% 60.0% 60.1% 60.2% 60.3% 60.4% 60.7%

Gross Margin Dif 0.1pp 0.3pp 2.2pp 0.1pp 0.5pp -0.3pp 0.1pp 0.2pp 0.2pp 0.1pp 0.1pp 0.1pp 0.1pp 0.1pp

EBITDA 2149 2187 2374 2966 3258 3913 4292 4853 5477 6170 6897 7671 8424 9213 11785 12.7% 11.9% 10.1%

EBITDA Growth % 20.1% 1.8% 8.6% 24.9% 9.8% 20.1% 9.7% 13.1% 12.9% 12.7% 11.8% 11.2% 9.8% 9.4% 8.2%

EBITDA Margin 22.8% 21.0% 21.4% 23.7% 23.6% 24.5% 24.3% 24.8% 25.3% 25.8% 26.1% 26.4% 26.5% 26.6% 26.9%

EBITDA Margin Dif 1.0pp -1.8pp 0.4pp 2.3pp -0.1pp 0.9pp -0.3pp 0.5pp 0.5pp 0.5pp 0.3pp 0.3pp 0.1pp 0.1pp 0.1pp

D&A -497 -578 -646 -676 -736 -796 -805 -873 -944 -1018 -1099 -1150 -1194 -1232 -1339 9.9% 5.8% 4.5% D&A % Sales -5.3% -5.6% -5.8% -5.4% -5.3% -5.0% -4.6% -4.5% -4.4% -4.3% -4.2% -4.0% -3.8% -3.6% -3.1%EBIT 1652 1609 1729 2290 2522 3117 3486 3981 4533 5152 5798 6521 7229 7981 10446 13.5% 13.3% 11.0%Net Financials 1 -22 4 31 37 14 26 17 20 23 26 30 33 37 49 71.1% 12.0% 12.0%EBT 1646 1587 1732 2322 2559 3131 3512 3998 4553 5175 5824 6551 7263 8018 10495 13.7% 13.3% 11.0%Taxes -388 -325 -411 -580 -613 -764 -860 -980 -1116 -1268 -1427 -1605 -1779 -1965 -2571 14.5% 13.4% 11.0% Effective tax rate (%) -23.6% -20.5% -23.7% -25.0% -24.0% -24.4% -24.5% -24.5% -24.5% -24.5% -24.5% -24.5% -24.5% -24.5% -24.5%EBM 1258 1262 1322 1741 1946 2367 2652 3019 3438 3907 4397 4946 5483 6054 7924 13.5% 13.2% 11.0%Minorities 7 8 8 9 13 6 7 8 9 10 11 13 14 15 20 -3.0% 13.3% 11.0%Net Income 1250 1253 1314 1732 1932 2361 2645 3011 3429 3897 4386 4933 5469 6039 7904 13.6% 13.2% 11.0%

EPS 2.01 2.01 2.11 2.78 3.10 3.79 4.24 4.83 5.50 6.25 7.04 7.92 8.78 9.69 12.68 13.5% 13.2% 11.0%Capex 942 937 510 754 1349 1599 1163 1236 1315 1363 1412 1438 1449 1468 1492 11.2% -6.3% 1.6%Capex / sales 10.0% 9.0% 4.6% 6.0% 9.8% 10.0% 6.6% 6.3% 6.1% 5.7% 5.3% 4.9% 4.6% 4.2% 3.4%EBITDA - Capex 1207 1250 1864 2212 1909 2314 3129 3617 4162 4807 5485 6232 6975 7745 10293 13.9% 21.6% 12.0%EBITDA - Capex % sales 13% 12% 17% 18% 14% 15% 18% 18% 19% 20% 21% 21% 22% 22% 23%

Ordinary Dividend per Share 1.05 1.05 1.10 1.40 1.60 1.90 2.36 2.68 3.05 3.47 3.91 4.39 4.87 5.38 7.04 12.6% 17.1% 11.0% Ordinary Pay Out 52.2% 52.2% 52.2% 50.4% 51.6% 50.1% 50.5% 50.5% 50.5% 50.5% 50.5% 50.5% 50.5% 50.5% 50.5%Special Dividend per Share 0.00 0.00 0.10 0.20 0.20 0.30 0.21 0.24 0.28 0.31 0.35 0.40 0.44 0.48 0.63 nm -2.8% 11.0% Special Pay Out 0.0% 0.0% 4.7% 7.2% 6.5% 7.9% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%Total Dividend (€/share) 1.05 1.05 1.20 1.60 1.80 2.20 2.57 2.92 3.33 3.78 4.26 4.79 5.31 5.86 7.67 15.9% 14.8% 11.0% Total Pay Out 52.2% 52.2% 56.9% 57.6% 58.1% 58.1% 55.5% 55.5% 55.5% 55.5% 55.5% 55.5% 55.5% 55.5% 55.5%Dvd Yield 1.8% 1.7% 2.0% 2.6% 2.8% 2.1% 2.6% 2.9% 3.3% 3.8% 4.3% 4.8% 5.3% 5.9% 7.7%

Recall there are 193 United Nations (UN) member states


KPI

12


2011YE 2012YE 2013E

Zara 125 130 107 -21 125 130 95 -33 110 115 110 -3Pull & Bear 45 50 65 18 50 55 69 17 40 45 43 1Massimo Dutti 40 45 43 1 55 60 57 -1 45 50 47 -1Berska 70 75 91 19 70 75 74 2 75 80 77 -1Stradivarius 80 85 91 9 90 95 96 4 95 100 97 -1Oysho 40 45 51 9 45 50 41 -7 35 40 37 -1Zara Home 35 40 26 -12 40 45 47 5 35 40 35 -3Uterque 25 30 9 -19 5 10 3 -5 5 10 5 -3Total Stores 460 500 483 3 480 520 482 -18 440 480 451 -9

Inditex 2013 Guidance Range

Dif. vs guidance (Avg.)






€ million EV Stake Attrib. Method

Retail 65,925.0 100% 65,925.0 DCF 15.4x EV/EBITDA 13 18.9x EV/EBIT 13

Enterprise Value 65,925.0

YE12 Net Debt & Adjustments -2,685.7

YE12 Net Debt -4,096.8

Dividends to be paid out in 2013 1,370.8

Minorities 40.3

Equity Value 68,610.7

Number of Shares (mn) 623.3

Price target YE13 (€ / share) 110.10

Implied Multiples

Source: Millennium investment banking

€ million 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2023E

CAGR 12-15

CAGR 15-23

EBIT 2,522 3,117 3,486 3,981 4,533 5,152 5,798 6,521 7,229 7,981 10,446 13.3% 11.0%

Depreciation & Amortisation 736 796 805 873 944 1,018 1,099 1,150 1,194 1,232 1,339 5.8% 4.5%

Cash Flow from Op. Act 3,258 3,913 4,292 4,853 5,477 6,170 6,897 7,671 8,424 9,213 11,785 11.9% 10.1%Income Taxes -757 -935 -1,046 -1,194 -1,360 -1,546 -1,739 -1,956 -2,169 -2,394 -3,134 13.3% 11.0%

Capital Expenditure -1,349 -1,599 -1,163 -1,236 -1,315 -1,363 -1,412 -1,438 -1,449 -1,468 -1,492 -6.3% 1.6%

Working Capital Changes -50 280 -123 -163 -244 -335 -405 -574 -750 -930 -1,564 -195.6% 26.1%

Free Cash Flow 1,102 1,658 1,960 2,260 2,558 2,926 3,341 3,702 4,056 4,421 5,595 15.5% 10.3%Discount Factor 1.00 0.92 0.84 0.77 0.71 0.65 0.60 0.55 0.43

Discounted Cash Flow 1960 2074 2154 2261 2369 2409 2422 2422 2391

PV of Cash Flows 25,259Terminal Value 40,666Enterprise Value 65,925


Price target

Inditex Stores Openings Guidance

vs Estimated

DCF

13


Risk-Free Rate 2.00% 2.00%

Country Risk Premium 2.17% 0.92%

Market Premium 5.00% 5.00%

Unlevered Beta 0.97 1.01

Levered Beta 0.97 1.01

Cost of Equity 8.98% 7.98%Cost of Debt 5.00% 4.00%

Corporate Tax Rate 27.2% 27.2%

After-tax Cost of Debt 3.64% 2.91%Leverage 0.00% 0.00%

WACC 8.98% 7.98%Perpetuity Growth Rate 1.98% 1.98%Real Perpetuity growth rate 0.64% 0.64%

LT Inflation 1.34% 1.34%

WACC-g 7.0% 6.0%*weightened by 2012 geographical revenues breakdown

Explicit Period

*GLOBAL DCF-Based assumptions

Terminal Value


EuropeE.P. T. V.











WACC-g 6.4% 5.7%

SpainE.P. T. V.











WACC-g 7.8% 6.2%

Asia & RoWE.P. T. V.











WACC-g 6.8% 5.8%

Americas E.P. T. V.











WACC-g 7.6% 6.7%

DCF Assumptions - Global

14


Sales Estimates

2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2023ECAGR

12-15

CAGR

15-23Zara 8938 10541 11749 13103 14613 16247 18012 19867 21818 23868 30546 11.5% 9.7%

Pull & Bear 957 1086 1168 1263 1367 1472 1608 1749 1885 2025 2477 8.0% 7.7%

Massimo Dutti 1013 1134 1240 1341 1443 1559 1695 1835 1981 2131 2614 8.4% 7.7%

Berska 1316 1485 1659 1833 2007 2203 2426 2657 2897 3145 3943 10.6% 8.8%Stradivarius 871 961 1094 1228 1361 1509 1676 1847 2017 2185 2685 12.3% 8.9%

Oysho 313 314 318 331 344 367 398 430 462 493 583 3.1% 6.8%

Zara Home 317 350 390 426 462 503 551 600 648 698 836 9.7% 7.7%

Uterque 68 74 79 84 93 101 109 124 139 155 206 7.8% 10.5%

Total 13793 15946 17696 19608 21690 23961 26474 29109 31845 34699 43889 10.8% 9.2%


% 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2023E

Zara 10.5% 17.9% 11.5% 11.5% 11.5% 11.2% 10.9% 10.3% 9.8% 9.4% 8.2%

Pull & Bear 11.7% 13.5% 7.5% 8.1% 8.3% 7.6% 9.2% 8.8% 7.8% 7.5% 6.7%

Massimo Dutti 12.9% 11.9% 9.3% 8.2% 7.6% 8.1% 8.7% 8.3% 7.9% 7.6% 6.8%

Berska 5.5% 12.8% 11.7% 10.5% 9.5% 9.8% 10.1% 9.5% 9.0% 8.6% 7.5%

Stradivarius 11.7% 10.3% 13.9% 12.2% 10.9% 10.9% 11.1% 10.2% 9.2% 8.3% 6.8%

Oysho 3.0% 0.3% 1.3% 4.0% 4.0% 6.8% 8.5% 8.1% 7.3% 6.8% 5.6%

Zara Home 7.8% 10.4% 11.3% 9.3% 8.5% 8.9% 9.4% 8.9% 8.1% 7.7% 5.3%

Uterque 15.3% 8.8% 6.8% 6.6% 10.0% 8.5% 8.1% 13.6% 12.4% 11.4% 9.4%

Total 10.1% 15.6% 11.0% 10.8% 10.6% 10.5% 10.5% 10.0% 9.4% 9.0% 7.8%LfL Sales 4% 6% 2% 2% 2% 3% 3% 2% 2% 2% 2% % store sales 80%


2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2023E

Zara 64.8% 66.1% 66.4% 66.8% 67.4% 67.8% 68.0% 68.2% 68.5% 68.8% 69.6%

Pull & Bear 6.9% 6.8% 6.6% 6.4% 6.3% 6.1% 6.1% 6.0% 5.9% 5.8% 5.6%

Massimo Dutti 7.3% 7.1% 7.0% 6.8% 6.7% 6.5% 6.4% 6.3% 6.2% 6.1% 6.0%

Berska 9.5% 9.3% 9.4% 9.3% 9.3% 9.2% 9.2% 9.1% 9.1% 9.1% 9.0%

Stradivarius 6.3% 6.0% 6.2% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.3% 6.1%

Oysho 2.3% 2.0% 1.8% 1.7% 1.6% 1.5% 1.5% 1.5% 1.5% 1.4% 1.3%

Zara Home 2.3% 2.2% 2.2% 2.2% 2.1% 2.1% 2.1% 2.1% 2.0% 2.0% 1.9%

Uterque 0.5% 0.5% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.5%

Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%


% 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2023E

Sales area growth 9.7% 11.4% 9.0% 8.8% 8.5% 8.0% 7.6% 7.1% 6.5% 6.1% 4.9% Sales growth 10.1% 15.6% 11.0% 10.8% 10.6% 10.5% 10.5% 10.0% 9.4% 9.0% 7.8%


Consolidated Sales

Sales Growth

Sales area growth x sales growth

Sales breakdown by format %

15


Stores divisional estimates

2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2023ECAGR 12-15

CAGR 15-23

Zara 1830 1925 2035 2155 2285 2420 2560 2700 2840 2980 3390 5.9% 5.1%Pull & Bear 747 816 859 909 964 1019 1074 1129 1179 1229 1379 5.7% 4.6%Massimo Dutti 573 630 677 722 767 812 857 902 947 992 1127 6.8% 4.9%Berska 811 885 962 1039 1116 1193 1270 1347 1424 1501 1732 8.0% 5.6%Stradivarius 684 780 877 974 1071 1168 1265 1360 1450 1535 1765 11.1% 6.4%Oysho 483 524 561 598 638 678 718 758 795 830 920 6.8% 4.7%Zara Home 310 357 392 424 456 488 520 552 582 612 684 8.5% 5.2%Uterque 89 92 97 102 112 122 132 152 172 192 252 6.8% 10.7%Total Stores 5527 6009 6460 6923 7409 7900 8396 8900 9389 9871 11249 7.2% 5.4%Zara weight (%) 33.1% 32.0% 31.5% 31.1% 30.8% 30.6% 30.5% 30.3% 30.2% 30.2% 30.1%


2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2023E

Zara 33.1% 32.0% 31.5% 31.1% 30.8% 30.6% 30.5% 30.3% 30.2% 30.2% 30.1%Pull & Bear 13.5% 13.6% 13.3% 13.1% 13.0% 12.9% 12.8% 12.7% 12.6% 12.5% 12.3%Massimo Dutti 10.4% 10.5% 10.5% 10.4% 10.4% 10.3% 10.2% 10.1% 10.1% 10.0% 10.0%Berska 14.7% 14.7% 14.9% 15.0% 15.1% 15.1% 15.1% 15.1% 15.2% 15.2% 15.4%Stradivarius 12.4% 13.0% 13.6% 14.1% 14.5% 14.8% 15.1% 15.3% 15.4% 15.6% 15.7%Oysho 8.7% 8.7% 8.7% 8.6% 8.6% 8.6% 8.6% 8.5% 8.5% 8.4% 8.2%Zara Home 5.6% 5.9% 6.1% 6.1% 6.2% 6.2% 6.2% 6.2% 6.2% 6.2% 6.1%Uterque 1.6% 1.5% 1.5% 1.5% 1.5% 1.5% 1.6% 1.7% 1.8% 1.9% 2.2%Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%


2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2023ECAGR 12-15

CAGR 15-23

Zara 107 95 110 120 130 135 140 140 140 140 135 11.0% 0.5%Pull & Bear 65 69 43 50 55 55 55 55 50 50 50 -7.3% -1.2%Massimo Dutti 43 57 47 45 45 45 45 45 45 45 45 -7.6% 0.0%Berska 91 74 77 77 77 77 77 77 77 77 77 1.3% 0.0%Stradivarius 91 96 97 97 97 97 97 95 90 85 75 0.3% -3.2%Oysho 51 41 37 37 40 40 40 40 37 35 30 -0.8% -3.5%Zara Home 26 47 35 32 32 32 32 32 30 30 20 -12.0% -5.7%Uterque 9 3 5 5 10 10 10 20 20 20 20 49.4% 9.1%Other 0 0 0 0 0 0 0 0 0 0 0 #DIV/0! #DIV/0!Total Stores 483 482 451 463 486 491 496 504 489 482 452 0.3% -0.9%


2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2023ECAGR 12-15

CAGR 15-23

Zara 1,824,753 2,009,717 2,174,717 2,354,717 2,549,717 2,752,217 2,962,217 3,172,217 3,382,217 3,592,217 4,207,217 8.3% 6.5%Pull & Bear 223,687 254,413 273,561 295,826 320,318 344,810 369,302 393,793 416,058 438,324 505,119 8.0% 5.9%Massimo Dutti 152,614 172,095 188,158 203,538 218,918 234,297 249,677 265,057 280,437 295,816 341,956 8.4% 5.7%Berska 300,351 338,450 378,094 417,737 457,381 497,024 536,668 576,311 615,955 655,598 774,529 10.6% 6.8%Stradivarius 178,231 206,584 235,232 263,881 292,529 321,177 349,826 377,883 404,464 429,569 497,498 12.3% 6.9%Oysho 68,261 74,669 80,452 86,235 92,486 98,738 104,990 111,241 117,024 122,495 136,561 7.4% 5.0%Zara Home 79,001 93,166 103,714 113,359 123,003 132,647 142,291 151,936 160,977 170,019 191,718 9.7% 5.7%Uterque 12,082 12,354 12,807 13,261 14,167 15,074 15,981 17,794 19,607 21,421 26,861 4.7% 8.3%Total Sales Area 2,838,980 3,161,448 3,446,736 3,748,553 4,068,519 4,395,985 4,730,951 5,066,233 5,396,740 5,725,458 6,681,458 8.8% 6.4%


Store network

Store openings

Sales area (sqm)

Stores network breakdown

by format %

16


2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2023E

Zara 64.3% 63.6% 63.1% 62.8% 62.7% 62.6% 62.6% 62.6% 62.7% 62.7% 63.0%Pull & Bear 7.9% 8.0% 7.9% 7.9% 7.9% 7.8% 7.8% 7.8% 7.7% 7.7% 7.6%Massimo Dutti 5.4% 5.4% 5.5% 5.4% 5.4% 5.3% 5.3% 5.2% 5.2% 5.2% 5.1%Berska 10.6% 10.7% 11.0% 11.1% 11.2% 11.3% 11.3% 11.4% 11.4% 11.5% 11.6%Stradivarius 6.3% 6.5% 6.8% 7.0% 7.2% 7.3% 7.4% 7.5% 7.5% 7.5% 7.4%Oysho 2.4% 2.4% 2.3% 2.3% 2.3% 2.2% 2.2% 2.2% 2.2% 2.1% 2.0%Zara Home 2.8% 2.9% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 2.9%Uterque 0.4% 0.4% 0.4% 0.4% 0.3% 0.3% 0.3% 0.4% 0.4% 0.4% 0.4%Other 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Total Sales Area 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%


2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2023ECAGR 12-15

CAGR 15-23

Zara 136,804 184,964 165,000 180,000 195,000 202,500 210,000 210,000 210,000 210,000 202,500 1.8% 0.5%Pull & Bear 27,367 30,726 19,148 22,265 24,492 24,492 24,492 24,492 22,265 22,265 22,265 -7.3% -1.2%Massimo Dutti 9,591 19,481 16,063 15,380 15,380 15,380 15,380 15,380 15,380 15,380 15,380 -7.6% 0.0%Berska 38,342 38,099 39,644 39,644 39,644 39,644 39,644 39,644 39,644 39,644 39,644 1.3% 0.0%Stradivarius 23,978 28,353 28,648 28,648 28,648 28,648 28,648 28,058 26,581 25,104 22,151 0.3% -3.2%Oysho 7,787 6,408 5,783 5,783 6,252 6,252 6,252 6,252 5,783 5,470 4,689 -0.8% -3.5%Zara Home 6,253 14,165 10,548 9,644 9,644 9,644 9,644 9,644 9,041 9,041 6,028 -12.0% -5.7%Uterque 1,211 272 453 453 907 907 907 1,813 1,813 1,813 1,813 49.4% 9.1%Total Sales Area 251,333 322,468 285,288 301,817 319,966 327,466 334,966 335,282 330,507 328,718 314,469 -0.3% -0.2%


2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2023E

Zara 4.898 5.245 5.402 5.564 5.731 5.903 6.080 6.263 6.451 6.644 7.260 % growth 2.2% 7.1% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%Pull & Bear 4.278 4.269 4.269 4.269 4.269 4.269 4.354 4.441 4.530 4.621 4.903 % growth -2.0% -0.2% 0.0% 0.0% 0.0% 0.0% 2.0% 2.0% 2.0% 2.0% 2.0%Massimo Dutti 6.638 6.589 6.589 6.589 6.589 6.655 6.788 6.924 7.063 7.204 7.645 % growth 5.8% -0.7% 0.0% 0.0% 0.0% 1.0% 2.0% 2.0% 2.0% 2.0% 2.0%Berska 4.382 4.388 4.388 4.388 4.388 4.432 4.520 4.611 4.703 4.797 5.090 % growth -7.9% 0.1% 0.0% 0.0% 0.0% 1.0% 2.0% 2.0% 2.0% 2.0% 2.0%Stradivarius 4.887 4.652 4.652 4.652 4.652 4.698 4.792 4.888 4.986 5.086 5.397 % growth -3.4% -4.8% 0.0% 0.0% 0.0% 1.0% 2.0% 2.0% 2.0% 2.0% 2.0%Oysho 4.585 4.205 3.953 3.834 3.719 3.719 3.794 3.870 3.947 4.026 4.272 % growth -8.8% -8.3% -6.0% -3.0% -3.0% 0.0% 2.0% 2.0% 2.0% 2.0% 2.0%Zara Home 4.013 3.757 3.757 3.757 3.757 3.794 3.870 3.948 4.027 4.107 4.358 % growth -0.7% -6.4% 0.0% 0.0% 0.0% 1.0% 2.0% 2.0% 2.0% 2.0% 2.0%Uterque 5.628 5.990 6.170 6.355 6.545 6.676 6.810 6.946 7.085 7.227 7.669 % growth 3.7% 6.4% 3.0% 3.0% 3.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%Total 4.858 5.044 5.134 5.231 5.331 5.451 5.596 5.746 5.901 6.061 6.569 % growth 0.4% 3.8% 1.8% 1.9% 1.9% 2.2% 2.7% 2.7% 2.7% 2.7% 2.7%


Change sales area (sqm)

Change sales / sqm

Sales area breakdown

by format %

17


Number of Stores by contry (above 100 stores per country)

2004 2005 2006 2007 2008 2009 2010 2011 2012

Spain 1321 1461 1628 1747 1896 1900 1925 1932 1930 9.8% 3.3% 0.1%Portugal 206 260 273 286 305 323 332 344 348 11.6% 5.1% 2.4%Italy 37 74 120 218 264 270 287 304 307 80.6% 9.6% 3.4%France 102 123 147 184 231 243 241 245 259 21.7% 9.4% 3.7%Poland 7 12 18 45 64 98 117 167 205 85.9% 37.5% 32.4%Greece 57 84 96 112 130 148 160 162 154 25.3% 12.6% -1.9%China 0 0 7 14 27 68 119 275 396 nm 104.1% 82.4%Russia 3 14 29 50 98 135 207 256 331 155.4% 60.6% 26.5%Mexico 103 126 152 176 186 193 208 229 246 19.6% 5.7% 8.8%Turkey 12 21 34 73 93 108 114 135 146 82.5% 16.0% 13.2%Saudi Arabia 26 50 60 69 92 95 109 118 130 38.4% 16.5% 9.2%Number of countries with stores 56 62 64 68 73 74 79 82 86

Change % Stores 2004 2005 2006 2007 2008 2009 2010 2011 2012

Spain 17% 11% 11% 7% 9% 0% 1% 0% 0%Portugal 4% 26% 5% 5% 7% 6% 3% 4% 1%Italy 147% 100% 62% 82% 21% 2% 6% 6% 1%France 24% 21% 20% 25% 26% 5% -1% 2% 6%Poland 17% 71% 50% 150% 42% 53% 19% 43% 23% Double-digit growthGreece 16% 47% 14% 17% 16% 14% 8% 1% -5%China nm nm nm 100% 93% 152% 75% 131% 44% Double-digit growthRussia 200% 367% 107% 72% 96% 38% 53% 24% 29% Double-digit growthMexico 5% 22% 21% 16% 6% 4% 8% 10% 7% Double-digit growthTurkey 20% 75% 62% 115% 27% 16% 6% 18% 8% Double-digit growthSaudi Arabia 30% 92% 20% 15% 33% 3% 15% 8% 10%

Change # Stores 2004 2005 2006 2007 2008 2009 2010 2011 2012

Spain 191 140 167 119 149 4 25 7 -2Portugal 8 54 13 13 19 18 9 12 4Italy 22 37 46 98 46 6 17 17 3France 20 21 24 37 47 12 -2 4 14Poland 1 5 6 27 19 34 19 50 38Greece 8 27 12 16 18 18 12 2 -8China 0 0 7 7 13 41 51 156 121Russia 2 11 15 21 48 37 72 49 75Mexico 5 23 26 24 10 7 15 21 17Turkey 2 9 13 39 20 15 6 21 11Saudi Arabia 6 24 10 9 23 3 14 9 12

CAGR 04-07 07-10 10-12


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Stores by country

Stores network breakdown by country -

(ex-Spain)

18


Net sales, Gross margin evolution

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1Q

10

2H

10

3H

10

20

10

1Q

11

2H

11

3H

11

20

11

1Q

12

2H

12

3H

12

20

12

€/$ change YoY (rhs) Net Sales (lhs) Net sales local currencies (lhs)


-1.1%

-0.8%

1.0%

0.9%

1.4%1.0%

0.4%

-0.8%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

54.0%

56.0%

58.0%

60.0%

62.0%

64.0%

1Q

09

2Q

09

3Q

09

4Q

09

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

Gross margin (lhs) Var Gross margin YoY (rhs)


-2%

2%

5%

2%

6%

3%

7%

6%

-3.0%

-1.0%

1.0%

3.0%

5.0%

7.0%

55%

56%

57%

58%

59%

60%

61%

1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12

Gross margin (lhs) LfL Sales (rhs) Var Gross margin YoY (rhs)


$/€ evolution vs Net Sales

Gross Margin

Gross margin vs LfL Sales

19


Share price charts

Last Country Mkt Cap Price Performance

Price (€ mn) 5d 1m 3m 6m 12m YTDEuropean RetailersInditex 100.05 SP 62,364 4.41 -1.48 -6.14 -0.74 48.85 -5.17H&M 224.60 SW 42,787 -3.23 -2.43 -5.59 4.90 4.17 0.04

Marks & Spencer 452.40 GB 8,587 -3.93 10.15 23.54 14.94 32.86 18.34

Debenhams 91.80 GB 1,350 -2.39 3.79 9.22 -20.10 17.92 -19.47

Next 4,601.00 GB 8,612 -0.39 4.43 9.73 24.22 52.25 24.05

Gap 41.79 US 14,729 3.06 7.04 16.50 31.37 62.61 34.63

European Markets

IBEX35 8,266.60 SP 421,634 -0.65 -3.25 -1.46 5.33 28.40 1.21

Eurostoxx 274.23 EC 3,636,615 -1.67 -1.32 1.05 6.50 26.87 5.13

Eurostoxx 50 2,724.08 EC 2,007,356 -1.64 -1.63 1.23 4.72 27.11 3.34

Eurostoxx Retail 344.92 EC 155,958 -1.98 -3.57 0.17 12.09 39.89 9.68

Source: Bloomberg, Prices as at 07-Jun-2013

85

125

165

205

245

285

325

365

Jun-

09

Sep

-09

Jan-

10

May

-10

Aug

-10

Dec

-10

Apr

-11

Jul-1

1

Nov

-11

Mar

-12

Jul-1

2

Oct

-12

Feb

-13

Jun-

13

INDITEX H&M Marks & Spencer EuroStoxx EuroStoxx Retail

Source: Bloomberg and Millennium investment banking

2004 2005 2006 2007 2008 2009 2010 2011 2012Inditex (€) 34.8% 27.0% 48.1% 3.0% -25.4% 38.5% 29.1% 12.9% 66.7%

H&M (Sek) 35.4% 16.6% 28.2% 13.7% -22.4% 30.1% 12.7% -1.2% 1.5%

GAP ($) -9.0% -16.5% 10.5% 9.1% -37.1% 56.5% 5.7% -16.2% 67.3%

Source: Bloomberg

Peers performance

Peers annual performance

Relative Performance

20


45

70

95

120

145

170

195

220

245

270

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

May

-11

Aug

-11

Nov

-11

Feb

-12

May

-12

Aug

-12

Nov

-12

Feb

-13

May

-13

INDITEX IBEX Euro Stoxx Euro Stoxx Retail


90

110

130

150

170

Jun-

12

Jul-1

2

Aug

-12

Sep

-12

Oct

-12

Nov

-12

Dec

-12

Dec

-12

Jan-

13

Mar

-13

Mar

-13

Apr

-13

May

-13

INDITEX IBEX Euro Stoxx Euro Stoxx Retail


Relative performance - 3 ½ Yrs

Relative performance - 1 Yr

21


90

110

130

150

170

Jun-

12

Jul-1

2

Aug

-12

Sep

-12

Oct

-12

Nov

-12

Dec

-12

Dec

-12

Jan-

13

Mar

-13

Mar

-13

Apr

-13

May

-13

INDITEX H&M GAP


85

95

105

115

125

135

Jan-

13

Jan-

13

Feb

-13

Feb

-13

Mar

-13

Mar

-13

Apr

-13

Apr

-13

May

-13

May

-13

Jun-

13

INDITEX H&M GAP


Relative performance - 1 Yr

Relative performance - YTD

22


Peer multiples

Company Country 2011 2012 2013E 2014E 2011 2012E 2013E 2014E 2011 2012E 2013E 2014EInditex SPAIN 4.1 3.5 3.2 2.8 17.5 14.4 12.9 11.3 -1.1 -1.0 -1.1 -1.2H&M SWEDEN 3.3 3.0 2.8 2.6 15.1 14.2 13.7 12.1 -0.9 -0.7 -0.6 -0.5Douglas GERMANY 0.5 0.5 na na 5.5 7.1 na na 0.3 0.6 na naMarks & Spencer UNITED KINGDOM 0.8 0.8 0.7 0.7 5.9 6.1 5.7 5.3 1.5 2.1 2.0 1.7Debenhams UNITED KINGDOM 0.5 0.5 0.4 0.4 4.3 4.4 4.4 4.3 1.4 1.4 1.4 1.3Next UNITED KINGDOM 2.1 2.1 2.0 2.0 10.3 9.6 9.3 8.9 0.8 0.6 0.6 0.5Sports Direct UNITED KINGDOM 1.7 1.4 1.3 1.2 14.3 11.0 9.8 8.9 0.7 0.1 -0.2 -0.7Brown Group UNITED KINGDOM 1.7 1.6 1.6 1.5 10.9 10.6 9.9 9.4 1.6 1.6 1.4 1.3Mulberry UNITED KINGDOM 3.8 3.9 3.5 3.1 16.0 20.5 16.8 14.5 -0.7 -0.7 -0.7 -0.8TJX USA 1.5 1.3 1.3 1.2 11.7 9.6 8.8 8.1 -0.2 -0.3 -0.4 -0.3GAP USA 1.3 1.2 1.1 1.0 9.5 7.6 7.0 6.1 -0.1 -0.1 -0.3 -0.5Coach USA 3.8 3.3 3.0 2.8 10.9 9.3 8.9 8.2 -0.5 -0.5 -0.6 -0.6Limited Brands USA 1.7 1.8 1.7 1.6 9.0 8.9 8.6 7.7 1.3 1.8 1.7 1.4Ross Stores USA 1.6 1.4 1.4 1.3 11.3 9.5 8.8 7.9 -0.4 -0.3 -0.2 -0.3Fast Retailing JAPAN 4.0 3.5 2.9 2.5 24.2 21.4 18.4 15.9 -1.3 -1.7 -1.7 -1.8Esprit HONG KONG 0.6 0.7 0.8 0.8 8.6 17.5 na 16.1 -1.1 -1.2 55.7 -2.5Sonae 0.7 0.6 0.6 0.6 6.2 5.6 5.3 4.7 3.9 3.1 2.8 2.3 *Sonae Retail 0.6 8.6 4.4 3.3 3.0 2.7 *Sonae SR (non-Food) 0.4 na

EV/Sales EV/EBITDA (x) Net Debt /EBITDA


Company 2011 2012E 2013E 2014E 2011 2012E 2013E 2014E 2011 2012E 2013E 2014EInditex 3.1 3.8 4.2 4.8 31.4 25.7 23.2 20.3 1.9% 2.3% 2.6% 2.9%H&M 1.1 1.2 1.2 1.4 24.0 22.5 21.6 19.2 4.1% 4.1% 4.1% 4.5%Douglas 2.2 -2.8 2.3 na 17.6 na 17.2 na 2.8% 0.0% na naMarks & Spencer 0.4 0.4 0.4 0.5 13.5 14.4 13.8 12.5 3.6% 3.6% 3.8% 4.1%Debenhams 0.1 0.1 0.1 0.1 10.3 9.6 9.6 9.2 3.2% 3.5% 3.5% 3.7%Next 3.0 3.6 4.0 4.3 18.7 16.0 14.6 13.3 1.9% 2.3% 2.5% 2.7%Sports Direct 0.2 0.3 0.4 0.4 27.8 20.6 17.4 14.8 0.0% 0.0% 0.6% 1.6%Brown Group 0.3 0.4 0.4 0.4 15.8 16.2 15.5 14.8 2.9% 3.0% 3.2% 3.4%Mulberry 0.5 0.4 0.5 0.6 24.6 32.3 28.0 23.7 0.5% 0.6% 0.7% 0.8%TJX 1.5 1.9 2.1 2.4 25.3 19.7 18.0 16.0 0.8% 0.9% 1.2% 1.3%GAP 1.2 1.8 2.0 2.3 26.0 17.4 15.1 13.5 1.1% 1.2% 1.2% 1.5%Coach 2.3 2.7 2.8 3.2 20.0 16.6 15.7 14.1 1.2% 1.5% 2.0% 2.3%Limited Brands 2.0 2.2 2.4 2.7 19.5 17.4 16.1 14.5 7.5% 9.9% 2.4% 2.4%Ross Stores 2.2 2.7 2.9 3.3 22.7 18.4 16.8 14.9 0.7% 0.9% 1.0% 1.2%Fast Retailing 5.4 6.4 8.2 9.2 0.1 0.0 0.0 0.0 na na na naEsprit 0.0 0.1 0.0 0.0 214.3 19.4 na 86.5 7.7% 3.1% 0.0% 0.7%Sonae 0.1 0.0 0.0 0.1 14.9 32.1 19.7 12.5 4.4% 4.4% 4.4% 4.5%

EPS P/E Div. Yield


Company Country Sector 2008 2009 2010 2011 2012 2013E 2014E 2015EInditex SPAIN Apparel/Footwear Retail 21.0% 21.4% 23.7% 23.6% 24.5% 24.6% 24.9% 24.6%H&M SWEDEN Apparel/Footwear Retail 25.2% 24.1% 25.6% 21.5% 21.1% 20.7% 21.1% 21.4%Douglas GERMANY Specialty Stores 8.8% 8.0% 8.6% 8.7% 6.8% na na naMarks & Spencer UNITED KINGDOM Department Stores 13.0% 12.7% 13.3% 13.0% 12.5% 12.7% 13.2% 13.5%Debenhams UNITED KINGDOM Department Stores 11.6% 11.9% 13.6% 12.5% 12.0% 9.6% 9.7% 9.8%Next UNITED KINGDOM Department Stores 18.2% 19.2% 20.1% 20.9% 21.5% 21.8% 22.0% 22.1%Sports Direct UNITED KINGDOM Apparel/Footwear Retail 10.0% 11.3% 12.5% 11.7% 12.9% 13.4% 13.9% naBrown Group UNITED KINGDOM Catalog/Specialty Distribution 16.3% 16.2% 16.3% 15.7% 15.4% 15.7% 15.8% 16.2%Mulberry UNITED KINGDOM Apparel/Footwear 10.1% 12.3% 21.5% 23.7% 18.9% 20.8% 21.7% naTJX UNITED STATES Apparel/Footwear Retail 9.7% 12.0% 12.7% 12.9% 14.0% 14.3% 14.6% 15.1%GAP UNITED STATES Apparel/Footwear Retail 14.6% 16.8% 17.3% 13.4% 15.5% 15.8% 16.4% 16.9%Coach UNITED STATES Apparel/Footwear Retail 40.2% 34.8% 35.4% 35.0% 35.3% 34.1% 34.1% 34.6%Limited Brands UNITED STATES Apparel/Footwear Retail 11.7% 14.1% 17.2% 18.4% 19.7% 19.7% 20.2% 21.0%Ross Stores UNITED STATES Apparel/Footwear Retail 9.8% 12.3% 13.6% 14.2% 15.0% 15.4% 15.9% 16.0%Fast Retailing JAPAN Apparel/Footwear Retail 16.4% 17.4% 18.2% 16.6% 16.2% 15.6% 15.6% 15.3%Esprit HONG KONG Apparel/Footwear Retail 22.8% 18.9% 14.8% 7.1% 4.2% -0.2% 4.9% 8.0%Sonae PORTUGAL Conglomerate 11.3% 11.8% 11.9% 11.3% 11.1% 11.3% 11.8% 12.4% *Sonae SR Portugal Non-Food Retail 5.6% 4.2% 3.5% 0.0% -2.1% -2.0% -1.0% 0.0%

EBITDA Margins


Multiples

Multiples

Peer EBITDA Margins

23


Historical Multiples

9.0 x

14.0 x

19.0 x

24.0 x

29.0 x

Jun

-03

Fe

b-0

4

Oct

-04

Jun

-05

Fe

b-0

6

Oct

-06

Jun

-07

Fe

b-0

8

Oct

-08

Jul-

09

Ma

r-1

0

No

v-1

0

Jul-

11

Ma

r-1

2

No

v-1

2

Inditex H&M Euro STOXX

Source: JCF and Millennium investment banking

9.0 x

14.0 x

19.0 x

24.0 x

29.0 x

Jun

-12

Jun

-12

Jul-

12

Au

g-1

2

Se

p-1

2

Se

p-1

2

Oct

-12

No

v-1

2

De

c-1

2

De

c-1

2

Jan

-13

Fe

b-1

3

Ma

r-1

3

Ma

r-1

3

Ap

r-1

3

Ma

y-1

3

Inditex H&M Euro STOXX


P/E – FY1

(updated on a semi annually basis)

P/E – FY1

(updated on a weekly basis

24


10

30

50

70

90

110

13.0 x

18.0 x

23.0 x

28.0 x

Jun

-03

Fe

b-0

4

Oc

t-0

4

Jun

-05

Fe

b-0

6

Oc

t-0

6

Jun

-07

Fe

b-0

8

Oc

t-0

8

Jun

-09

Fe

b-1

0

Oc

t-1

0

Jun

-11

Fe

b-1

2

Oc

t-1

2

Inditex P/E (lhs) Stock Px (rhs)


64

79

94

109

18.0 x

20.0 x

22.0 x

24.0 x

26.0 x

28.0 x

30.0 x

Inditex P/E (lhs) Stock Px (rhs)


P/E – FY1


P/E – FY1

(updated on a weekly basis)

25


4.0 x

6.0 x

8.0 x

10.0 x

12.0 x

14.0 x

Jun-09 Apr-10 Feb-11 Dec-11 Oct-12

Inditex H&M


8.0 x

9.0 x

10.0 x

11.0 x

12.0 x

13.0 x

14.0 x

15.0 x

Jun

-12

Jul-

12

Jul-

12

Au

g-1

2

Se

p-1

2

Oc

t-1

2

Oc

t-1

2

No

v-1

2

De

c-1

2

Jan

-13

Jan

-13

Fe

b-1

3

Mar

-13

Ap

r-1

3

Ap

r-1

3

Ma

y-1

3

Inditex H&M


EV/EBITDA - FY1

(updated on a weekly basis

EV/EBITDA - FY1


26


Consolidated estimates

2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2023ECAGR 12-15

CAGR 15-23

Sales 13793 15946 17696 19608 21690 23961 26474 29109 31845 34699 43889 10.8% 9.2%EBITDA 3258 3913 4292 4853 5477 6170 6897 7671 8424 9213 11785 11.9% 10.1%Depreciation & Amortisation -736 -796 -805 -873 -944 -1018 -1099 -1150 -1194 -1232 -1339 5.8% 4.5%EBIT 2522 3117 3486 3981 4533 5152 5798 6521 7229 7981 10446 13.3% 11.0%Net Financials 37 14 26 17 20 23 26 30 33 37 49 12.0% 12.0%EBT 2559 3131 3512 3998 4553 5175 5824 6551 7263 8018 10495 13.3% 11.0%Taxes -613 -764 -860 -980 -1116 -1268 -1427 -1605 -1779 -1965 -2571 13.4% 11.0%EBM 1946 2367 2652 3019 3438 3907 4397 4946 5483 6054 7924 13.2% 11.0%Minorities 13 6 7 8 9 10 11 13 14 15 20 13.3% 11.0%Net Income 1932 2361 2645 3011 3429 3897 4386 4933 5469 6039 7904 13.2% 11.0%EBITDA margin (%) 23.6% 24.5% 24.3% 24.8% 25.3% 25.8% 26.1% 26.4% 26.5% 26.6% 26.9%EBIT margin (%) 18.3% 19.5% 19.7% 20.3% 20.9% 21.5% 21.9% 22.4% 22.7% 23.0% 23.8%Effective tax rate (%) 24.0% 24.4% 24.5% 24.5% 24.5% 24.5% 24.5% 24.5% 24.5% 24.5% 24.5%Net margin (%) 14.0% 14.8% 14.9% 15.4% 15.8% 16.3% 16.6% 16.9% 17.2% 17.4% 18.0%


2011 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2022E

Sales 10.1% 15.6% 11.0% 10.8% 10.6% 10.5% 10.5% 10.0% 9.4% 9.0% 7.8%EBITDA 9.8% 20.1% 9.7% 13.1% 12.9% 12.7% 11.8% 11.2% 9.8% 9.4% 8.2%Depreciation & Amortisation 8.9% 8.2% 1.2% 8.4% 8.1% 7.9% 7.9% 4.7% 3.9% 3.2% 4.4%EBIT 10.1% 23.6% 11.9% 14.2% 13.9% 13.6% 12.5% 12.5% 10.9% 10.4% 8.7%Net Financials 18.9% -61.8% 82.0% -32.3% 13.9% 15.8% 14.0% 13.3% 12.0% 11.3% 9.3%EBT 10.2% 22.4% 12.2% 13.8% 13.9% 13.7% 12.6% 12.5% 10.9% 10.4% 8.7%Taxes 5.7% 24.6% 12.6% 13.8% 13.9% 13.7% 12.6% 12.5% 10.9% 10.4% 8.7%EBM 11.8% 21.7% 12.0% 13.8% 13.9% 13.7% 12.6% 12.5% 10.9% 10.4% 8.7%Minorities 44.4% -53.8% 11.9% 14.2% 13.9% 13.6% 12.5% 12.5% 10.9% 10.4% 8.7%Net Income 11.5% 22.2% 12.0% 13.8% 13.9% 13.7% 12.6% 12.5% 10.9% 10.4% 8.7%


Fixed Assets 5,521.9 6,198.2 6,846.3 7,552.1 8,318.2 9,151.6 10,071.2 11,031.4 12,024.0 13,055.1 16,346.2

Working Capital -1,558.6 -1,813.1 -2,030.7 -2,197.1 -2,357.4 -2,524.1 -2,718.4 -2,911.7 -3,101.2 -3,287.8 -3,814.5

Invested Capital 3,963.3 4,385.1 4,815.5 5,354.9 5,960.8 6,627.5 7,352.9 8,119.7 8,922.8 9,767.4 12,531.7Net Debt -3,492.3 -4,096.8 -4,854.4 -5,668.1 -6,603.2 -7,687.8 -8,933.0 -10,382.3 -12,035.1 -13,901.8 -20,929.2

Minority Interests 40.8 35.9 40.3 45.9 52.2 59.4 66.8 75.2 83.3 92.0 120.4

Equity 7,414.8 8,445.9 9,629.6 10,977.2 12,511.8 14,256.0 16,219.0 18,426.8 20,874.6 23,577.1 33,340.5

Capital Employed 3,963.3 4,385.1 4,815.5 5,354.9 5,960.8 6,627.5 7,352.9 8,119.7 8,922.8 9,767.4 12,531.7

2018E 2019E 2020E 2023E2016E 2017E€ million 2011 2012 2013E 2014E 2015E


Cash Flow from Operations* 2,631.2 3,442.6 3,359.4 3,735.8 4,142.1 4,592.1 5,092.1 5,517.6 5,918.2 6,340.2 7,665.0

Cash Flow from Investing -1,348.7 -1,599.0 -1,162.5 -1,236.0 -1,315.3 -1,363.5 -1,411.7 -1,438.3 -1,449.0 -1,467.8 -1,492.2

Cash Flow from Financing -1,144.4 -1,483.5 -2,020.0 -2,084.3 -2,499.2 -2,887.9 -3,285.2 -3,772.3 -4,279.5 -4,772.4 -6,493.8

EBITDA - Operating Capex 1,908.9 2,314.0 3,129.0 3,617.3 4,161.7 4,806.9 5,485.3 6,232.4 6,974.6 7,745.5 10,292.7

2018E 2019E 2020E 2023E2016E 2017E2014E 2015E€ million 2011 2012 2013E


EBITDA 3,257.7 3,913.0 4,291.6 4,853.2 5,477.0 6,170.4 6,897.0 7,670.7 8,423.6 9,213.2 11,785.0

Capex -1,348.7 -1,599.0 -1,162.5 -1,236.0 -1,315.3 -1,363.5 -1,411.7 -1,438.3 -1,449.0 -1,467.8 -1,492.2

EBITDA-Capex 1,908.9 2,314.0 3,129.0 3,617.3 4,161.7 4,806.9 5,485.3 6,232.4 6,974.6 7,745.5 10,292.7

Dividends 997.3 1,121.6 1,370.8 1,467.9 1,671.1 1,903.1 2,162.9 2,434.4 2,737.9 3,035.5 4,035.0

Payout Ratio 52% 48% 52% 49% 49% 49% 49% 49% 50% 50% 51%

EBITDA-Capex-Dividends 911.6 1,192.4 1,758.2 2,149.3 2,490.6 2,903.8 3,322.3 3,798.0 4,236.7 4,710.0 6,257.7

Financial Costs, Net 37.0 14.1 25.7 17.4 19.8 23.0 26.2 29.7 33.2 37.0 49.1

Net Debt -3,492.3 -4,096.8 -4,854.4 -5,668.1 -6,603.2 -7,687.8 -8,933.0 -10,382.3 -12,035.1 -13,901.8 -20,929.2

Net Debt / EBITDA (x) -1.1 -1.0 -1.1 -1.2 -1.2 -1.2 -1.3 -1.4 -1.4 -1.5 -1.8

Net Debt / Equity (x) -0.5 -0.5 -0.5 -0.5 -0.5 -0.5 -0.6 -0.6 -0.6 -0.6 -0.6

Net Debt / Capital Employed (x) -0.9 -0.9 -1.0 -1.1 -1.1 -1.2 -1.2 -1.3 -1.3 -1.4 -1.7

EBITDA / Financial Costs (x) 88.0 276.9 166.9 278.7 276.2 268.7 263.4 258.4 253.3 249.0 240.3

2018E 2019E 2020E 2023E2016E 2017E€ million 2011 2012 2013E 2014E 2015E

Source: Company data and Millennium investment bank

P & L

Financial Balance Sheet

Cash-flow Statement

Debt Ratio

Growth %

27


Quarterly evolution

€ million 1Q12 2Q12 3Q12 4Q12 1Q13E 2Q13E 3Q13E 4Q13E1Q12 YoY

2Q12 YoY

3Q12 YoY

4Q12 YoY

1Q13 YoYE

2Q13 YoYE

3Q13 YoYE

4Q13 YoYE

Net sales 3,416 3,823 4,123 4,583 3,602 4,365 4,557 5,172 15% 18% 18% 12% 5% 14% 11% 13%Cost of sales -1,358 -1,568 -1,562 -1,929 -1,459 -1,803 -1,736 -2,169 11% 15% 16% 14% 7% 15% 11% 12%

Gross profit 2,058 2,255 2,561 2,654 2,143 2,562 2,821 3,003 18% 20% 19% 11% 4% 14% 10% 13%

Gross margin 60.2% 59.0% 62.1% 57.9% 59.5% 58.7% 61.9% 58.1% 1.4pp 1.0pp 0.4pp -0.8pp -0.7pp -0.3pp -0.2pp 0.1pp

Operating expenses -1,294 -1,398 -1,405 -1,520 -1,392 -1,615 -1,574 -1,656 14% 14% 17% 12% 8% 16% 12% 9%

Cash Costs -2,652 -2,966 -2,967 -3,449 -2,851 -3,418 -3,310 -3,825 12% 15% 17% 13% 8% 15% 12% 11%EBITDA 764 857 1,156 1,134 751 947 1,247 1,347 27% 30% 21% 9% -2% 11% 8% 19%

EBITDA Margin 22.4% 22.4% 28.0% 24.8% 20.8% 21.7% 27.4% 26.0% 2.1pp 2.1pp 0.7pp -0.7pp -1.5pp -0.7pp -0.7pp 1.3pp

Depreciation -187 -196 -210 -203 -189 -198 -212 -205 10% 11% 10% 3% 1% 1% 1% 1%

EBIT 577 661 946 931 561 749 1,034 1,142 34% 37% 24% 10% -3% 13% 9% 23%Margin 16.9% 17.3% 22.9% 20.3% 15.6% 17.2% 22.7% 22.1% 2.3pp 2.4pp 1.1pp -0.3pp -1.3pp -0.1pp -0.2pp 1.7pp

Net Financials 2 26 -12 -2 10 5 5 6 nm nm nm nm nm nm nm nm

EBT 579 687 934 930 571 754 1,039 1,147 32% 39% 22% 8% -1% 10% 11% 23%Taxes -146 -174 -224 -220 -144 -191 -249 -276 39% 63% 25% -1% -1% 10% 11% 26%

EBM 433 513 710 710 427 563 790 871 30% 32% 21% 11% -1% 10% 11% 23%Minority Interests 0 2 0 4 0 0 0 7 nm -50% nm -20% #DIV/0! nm #DIV/0! 68%

Net Income 433 511 710 706 427 563 790 864 nm nm nm nm nm nm nm nm

Source: Company data and Millennium investment banking.

€ million 1Q12 1H12 9M12 2012 1Q13E 1H13E 9M13E 2013E1Q12 YoY

1H12 YoY

9M12 YoY

2012 YoY

1Q13 YoYE

1H13 YoYE

9M13 YoYE

2013 YoYE

Net sales 3,416 7,239 11,362 15,945 3,602 7,967 12,524 17,696 15% 17% 17% 16% 5% 10% 10% 11%Zara na 4,835 na 10,541 na 5,327 na 11,749 na 20% na 18% na 10% na 11%

Pull & Bear na 468 na 1,086 na 510 na 1,168 na 14% na 13% na 9% na 8%

Massimo Dutti na 490 na 1,134 na 537 na 1,240 na 7% na 12% na 10% na 9%

Bershka na 666 na 1,485 na 729 na 1,659 na 11% na 13% na 9% na 12%Stradivarius na 455 na 961 na 512 na 1,094 na 15% na 10% na 12% na 14%

Oysho na 143 na 314 na 146 na 318 na 2% na 0% na 2% na 1%

Zara Home na 150 na 350 na 172 na 390 na 12% na 10% na 15% na 11%Uterque na 33 na 74 na 33 na 79 na 6% na 9% na -1% na 7%

Cost of sales -1,358 -2,926 -4,488 -6,417 -1,459 -3,261 -4,998 -7,167 11% 13% 14% 14% 7% 11% 11% 12%

Gross profit 2,058 4,313 6,874 9,528 2,143 4,705 7,526 10,529 18% 19% 19% 16% 4% 9% 9% 11%Gross margin 60.2% 59.6% 60.5% 59.8% 59.5% 59.1% 60.1% 59.5% 1.4pp 1.2pp 0.9pp 0.4pp -0.7pp -0.5pp -0.4pp -0.3pp

Operating expenses -1,294 -2,692 -4,097 -5,617 -1,392 -3,007 -4,581 -6,238 14% 14% 15% 14% 8% 12% 12% 11%

Cash Costs -2,652 -5,618 -8,584 -12,032 -2,851 -6,269 -9,579 -13,405 12% 14% 15% 14% 8% 12% 12% 11%EBITDA 764 1,621 2,778 3,913 751 1,698 2,945 4,292 27% 29% 25% 20% -2% 5% 6% 10%

EBITDA Margin 22.4% 22.4% 24.4% 24.5% 20.8% 21.3% 23.5% 24.3% nm nm nm nm nm nm nm nm

Depreciation -187 -383 -593 -796 -189 -387 -600 -805 10% 10% 10% 8% 1% 1% 1% 1%

EBIT 577 1,238 2,185 3,117 561 1,310 2,345 3,486 34% 35% 30% 24% -3% 6% 7% 12%Margin 16.9% 17.1% 19.2% 19.5% 15.6% 16.4% 18.7% 19.7% 2.3pp 2.4pp 1.9pp 1.3pp -1.3pp -0.7pp -0.5pp 0.2pp

Net Financials 2 28 16 14 10 15 20 26 nm nm nm nm nm nm nm nm

EBT 579 1,266 2,201 3,131 571 1,325 2,365 3,512 32% 36% 29% 22% -1% 5% 7% 12%Taxes -146 -320 -544 -764 -144 -335 -584 -860 39% 51% 39% 25% -1% 5% 7% 13%

EBM 433 946 1,657 2,367 427 990 1,780 2,652 30% 31% 26% 22% -1% 5% 7% 12%Minority Interests 0 2 2 6 0 0 0 7 nm -60% -75% -54% #DIV/0! nm nm 12%Net Income 433 944 1,655 2,361 427 990 1,780 2,645 nm nm nm nm nm nm nm nm


1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13E 2Q13E 3Q13E 4Q13E

Zara 1745 1759 1804 1830 1855 1863 1908 1925 1945 1955 1998 2035Pull & Bear 693 704 728 747 757 770 794 816 823 831 848 859Massimo Dutti 542 545 568 573 584 592 616 630 638 643 663 677Berska 736 751 785 811 827 839 871 885 901 915 949 962Stradivarius 617 633 659 684 699 716 748 780 797 815 847 877Oysho 443 449 468 483 492 498 520 524 531 536 556 561Zara Home 291 293 303 310 315 325 339 357 361 368 377 392Uterque 87 87 87 89 89 90 91 92 93 94 95 97Other 0 0 0 0 0 0 0 0 0 0 0 0Total Stores 5154 5221 5402 5527 5618 5693 5887 6009 6089 6157 6333 6460


Quarterly preview - YoY

Quarterly preview – Breakdown by concepts

– ACC YoY

Store network

28


1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13E 2Q13E 3Q13E 4Q13E



1Q11 1H11 9M11 2011 1Q12 1H12 9M12 2012 1Q13E 1H13E 9M13E 2013E



-2%

2%

5%

2%

6%

3%

7%

6%

55%

56%

57%

58%

59%

60%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12

Gross margin (RHS) LfL Sales (LHS)

Store Openings - ACC

Store Openings - QoQ

Gross margin vs LfL Sales

29


Income Statements

Operating Revenues 13,793.0 15,946.0 17,696.1 19,607.8EBITDA 3,257.7 3,913.0 4,291.6 4,853.2Depreciation and Amortisation -736.0 -796.0 -805.2 -872.5

Net Financials 37.0 14.1 25.7 17.4

Income Taxes -613.0 -764.0 -860.5 -979.5

Minority Interests 13.0 6.0 6.7 7.7

Net Income 1,932.0 2,361.1 2,644.9 3,010.9EBITDA margin (%) 23.6 24.5 24.3 24.8

EBIT margin (%) 18.3 19.5 19.7 20.3

EBT margin (%) 18.6 19.6 19.8 20.4

Effective Tax Rate (%) 24.0 24.4 24.5 24.5

Net margin (%) 14.0 14.8 14.9 15.4


Financial Balance Sheet

Fixed Assets 5,521.9 6,198.2 6,846.3 7,552.1

Working Capital -1,558.6 -1,813.1 -2,030.7 -2,197.1

Invested Capital 3,963.3 4,385.1 4,815.5 5,354.9Net Debt -3,492.3 -4,096.8 -4,854.4 -5,668.1

Minority Interests 40.8 35.9 40.3 45.9

Equity 7,414.8 8,445.9 9,629.6 10,977.2

Capital Employed 3,963.3 4,385.1 4,815.5 5,354.9


Cash-Flow Statements

Cash Flow from Operations* 2,631.2 3,442.6 3,359.4 3,735.8

Cash Flow from Investing -1,348.7 -1,599.0 -1,162.5 -1,236.0

Cash Flow from Financing -1,144.4 -1,483.5 -2,020.0 -2,084.3

EBITDA - Operating Capex 1,908.9 2,314.0 3,129.0 3,617.3

* CFO corresponds to operating results adjusted for changes in WC; includes net interest and excludes div.


Leverage Indicators

EBITDA 3,257.7 3,913.0 4,291.6 4,853.2

Capex -1,348.7 -1,599.0 -1,162.5 -1,236.0

EBITDA-Capex 1,908.9 2,314.0 3,129.0 3,617.3

EBITDA-Capex-Dividends 911.6 1,192.4 1,758.2 2,149.3

Financial Costs, Net 37.0 14.1 25.7 17.4

Net Debt -3,492.3 -4,096.8 -4,854.4 -5,668.1

Net Debt / EBITDA (x) -1.1 -1.0 -1.1 -1.2

Net Debt / Equity (x) -0.5 -0.5 -0.5 -0.5

Net Debt / Capital Employed (x) -0.8 -0.9 -0.9 -1.0

EBITDA / Financial Costs (x) 88.0 276.9 166.9 278.7


2013E 2014E

2013E 2014E

2013E 2014E

2013E 2014E

2012€ million 2011

2012€ million 2011

2012

€ million 2011 2012

€ million 2011

30


Disclosures

� This report has been prepared by Banco Millennium bcp Investimento, S.A., a subsidiary of Millennium bcp, also known

as Millennium investment banking (Mib).

� Mib is regulated by Comissão de Mercado de Valores Mobiliários.

� Recommendations:

� Buy means more than 10% absolute return;

� Neutral means between 0% and +10% absolute return;

� Reduce means between -10% and 0% absolute return;

� Sell means less than -10% absolute return.

� Unless otherwise specified, the time frame for price targets included in this report is current year-end or next year-end.

� Risk is defined by the analyst’s view in a qualitative way.

� Usually we update our models and price targets in between 6 and 18 months.

� Mib prohibits its analysts and members of their households to own any shares of the companies covered by them. §

Millennium group may have business relationships with the companies mentioned in this report.

� Mib, expects to receive or intends to seek compensation s for investment banking services from the companies

mentioned in this report.

� The views expressed above, accurately reflect personal views of the authors. They have not and will not receive any

compensation for providing a specific recommendation or view in this report. There were not any agreements between

the companies covered and the analysts regarding the recommendation.

� Analysts are paid in part based on the profitability of Millennium group, which includes investment bank revenues.

(Unrated)Sell

ReduceNeutral

Buy

79.67

83.47

87.28

91.08

94.89

98.69

102.49

106.30

110.10

Jun/

12

Jul/1

2

Aug

/12

Sep

/12

Oct

/12

Nov

/12

Dec

/12

Jan/

13

Feb

/13

Mar

/13

Apr

/13

May

/13

Jun/

13

Jul/1

3

Inditex

Recommendation Stock Price Price Target

DISCLAIMER

This information is not an offer to sell or a solicitation to enter into any particular deal or contract. It consists of data compiled

by or of opinions or estimates from Banco Millennium bcp Investimento, S.A. and no representation or warranty is made as to

its accuracy or completeness. This information is merely an auxiliary means of analysis to be used by its recipients, who will

be solely responsible for its use, including for any losses or damages that may, directly or indirectly, derive from it. Its

reproduction is not allowed without permission from the Millennium group. The data herein disclosed are merely indicative

and reflect the market conditions prevailing on the date they have been collected. Thus, its accuracy and timing must

absolutely be confirmed before its usage. Any alteration in the market conditions shall imply the introduction of changes in

this report. This information/opinions may be altered without prior notice and may differ or be contrary to opinions expressed

by other business areas of Millennium group as a result of using different assumptions and criteria. The analysis contained

herein is based on numerous assumptions. Different assumptions could result in materially different results.

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