Take 5 and come back tomorrow (13/3/25) Markets Real Estate ITX TEF Retail sales
None of what follows is investment advice.
Market environment: Fear of Shutting down – (Asia-Pacific markets declined with European equities flat and US futures pointing down) – Asia-Pacific markets declined as fears of a US government shut down were added to the list of worries, despite a relatively mild CPI print. European equities are flat, and US futures point lower.
Response to the crisis: More is better – (The rental limits in Catalonia destroy one fourth of the housing offer in one year (El Economista p24)/ The ICO government owned development bank proposes to take on half the risk of bank loans to housing developers (El Economista p8)) – The above provide two opposing examples of government intervention in the real estate market. Setting rental limits decreases supply while reducing housing development risk should favour it. Most of the focus on solving housing issues usually centres on subsidising demand, which usually has little impact as the subsidy is passed on to seller/landlord, while taking measures to lower housing development risk (by sharing it with government institutions) should favour increased housing supply, leading to greater access to affordable housing.
Inditex: Not the time or place for disappointments – (2024 net profit €5.866bn +9% on revenues of €38.632bn +7.5% (+10.5% on constant currency), with 2025 initial sales showing 4% growth) – The sharp fall in the share price seems more related to weak start of the year sales growth than to the 2024 earnings which were roughly in line with consensus. A combination of slowing sales, in an uncertain environment, including FX, with rising investment is not a winning one. Now is not the time to disappoint expectations.
Telefonica: Doint the dirty work – (The chairman explores the entry of new partners in Moistar+ and the entry into the FTA TV sector (Vozpopuli)– One of the risks of the recent “takeover” of Telefonica by the Government, including the acquisition of a 10% and the “coup” carried out to replace former chairman Pallete with the Socialist former head of Indra Murtra, is that the company could be used to further political objectives. Telefonica getting involved in FTA TV, after the recent rejection by Prisa of a similar project, would be a clear example of this.
Retail sales: Slowing January – (January retail sales show 2.2% YoY growth (adjusted for working days and seasonality) (National Statistics Institute) – The January +2.2% YoY growth represents a considerable slowdown from the +4% of December, although it still represents 26 consecutive months of positive figures. Food sales surprisingly grew more than average (+2.8%) and within the rest of lines personal equipment (+4.9%) stood out. Large chains (+3.7%) and large surface stores (+3.5%) sales strongly outperformed single location shops (+0.6%), pointing to consumers choosing price over location.