MADRID Feb 18 Shares in Zara owner Inditex
, the world's largest clothing retailer, fell 2.8
percent on Tuesday as investors pondered whether negative
currency effects in emerging markets would weigh on its
Inditex's shares, which have risen 5.9 percent in the last
year, traded at 106.75 euros ($150) at 1218 GMT. On Tuesday,
Citi downgraded the stock to "neutral" from "buy", cutting its
price target to 120 euros from 130 euros.
"We have increased our full year 2014 adverse currency
translation impact from -3 percent to -4 percent," Citi said in
Emerging market currencies have been volatile this year due
to jitters over the withdrawal of U.S. monetary stimulus and a
possible slowdown of the Chinese economy.
Brokerage S&P Capital IQ upgraded Inditex after the Citi
downgrade, which helped pare an initial 3 percent fall in the
share price. The brokerage said it expected a solid recovery in
demand in 2015 to drive a like-for-like sales rise of 4 percent.
Inditex has increased sales through an aggressive expansion
to new markets like Asia and Brazil to tap fast-growing,
fashion-hungry middle classes. That has boosted its sales but
made it more exposed to currency volatility.
A Madrid-based trader said many investors remained bullish
on Inditex because of the growth prospects in new markets.
"I think (Inditex shares) could fall further but perhaps the
floor will be 102 euros or 100 euros," the trader said.
Inditex is due to post full-year results on March 19.
Fast-fashion rival Hennes & Mauritz saw its
fourth-quarter gross margin slip to 60.8 percent from 61.6
percent, a fall the company blamed on foreign exchange rates.
($1 = 0.7298 euros)
(Reporting By Sarah Morris; editing by Tom Pfeiffer)