Retail vs. Luxury: LVMH vs. ITX - The King of the Jungle vs. The Chameleon Queen

Retail x Luxury: LVMH vs. ITX - The King of the Jungle & the LVMH and Inditex are widely considered the champions of their respective sectors, delivering>10% compound annual TSR over the last 20 years. In this note, we compare & contrast the William Woods+44 20 7676 6806william.woods@bernsteinsg.com Inditex and LVMH have much in common.Both have outperformed the European Indexover the last 25 years. Both have delivered above sector average growth at leading marginsand ROIC. Both have delivered compounding LDD organic growth over the last 15 years, Luca Solca+41 582 723 126luca.solca@bernsteinsg.com Maria Meita+44 20 7170 0540maria.meita@bernsteinsg.comRichard Trainor+44 20 7762 1050richard.trainor@bernsteinsg.com However, the differences are also evident.LVMH is a multi-category conglomerate;ITX focuses on mono-brand mass market apparel. LVMH’s F&LG division remains the clearvalue driver, with higher RONA than other divisions; whilst Zara and ITX’s other conceptseach generate returns around the group average. LVMH has sacrificed ROIC in the pursuitof M&A and vertical integration; ITX enjoys much stronger ROIC (helped by negative Yi-Peng Khoo, CFA+44 20 7676 6822yi-peng.khoo@bernsteinsg.com Inditex and LVMH are solving for different product, price, and category problems: Eric Chen, CFA+852 2123 2628eric.chen@bernsteinsg.com Inditexis a fashion chameleon. They take no view on fashion, instead aiming to imitate andcamouflage amongst ever-changing fashion trends. This is supported by a virtuous flywheelof a near-shored supply chain, shallow initial buys & rapid replenishment, strong data flow Rhea Gudiwala+44 20 7676 7293rhea.gudiwala@bernsteinsg.com LVMHis a luxury brand and category ‘hyperscaler’. It recognizes that high-equity luxurybrands are a scarce resource that must be nurtured and sustained over the long-term,despite the potential for significant short-term cycles. Decentralized brand managementis combined with centralized financial discipline and talent management at a group level.LVMH’s flywheel sees mega-brand brand equity driving pricing power, pricing power driving Specialist Sales Alix Turner+44 20 7762 4044alix.turner@bernsteinsg.com Both companies deliver high-quality growth, but Inditex offers stability while LVMHprovides cyclicality.Inditex’s fast fashion flywheel allows it to consistently compoundahead of the market. This has allowed it to outgrow a proxy of its market in 13 of the past 14years, delivering an average +10.6% organic cFX growth (vs. the proxy market at +2.2%).LVMH’s luxury flywheel allows it to defend its dominant market position and chip away atpeers in a highly concentrated luxury market. This allows it to compound in the long-term, Investors weighing the two names should bear these differences in mind.Thestrength of the Inditex model is shown in industry leading growth, ~20% EBIT margins, andstrong returns. Consistency is key - we expect it to deliver a 12% TSR over the next 5 years.The strength of the LVMH model is shown in its >30% F&LG EBIT margins in an industryunder pressure. Scale is king - we expect LVMH to continue to set the tone and pace of INVESTMENT IMPLICATIONS GENERAL RETAIL INVESTMENT IMPLICATIONS We rate Inditex Outperform with a TP of €60. Inditex is a fashion chameleon, constantly reinvesting itself to stock product inline with the latest trends. The business model which enables this is inimitable as it is a virtuous circle which has been built overthe last 50 years. Looking out across the rest of 2026, the macro environment remains complex and volatile but the Inditexmodel is as strong as ever and will benefit from its exposure to higher affluence consumers. We think the business is well setto compound at an 8% sales CAGR over FY25-FY28 (>2-3x faster than the market), and to deliver industry-leading margins LUXURY INVESTMENT IMPLICATIONS We rate LVMH Outperform, PT €600.00. LVMH is the king of a luxury jungle on the cusp of change. In the near-term, we expectcreative and strategic turnarounds across multiple brands and divisions (Dior in F&LG, Tiffany & Co. in W&J, work on W&S, anda disposal of underpeforming assets in SR) to come into effect in 2026. In the medium- to long-term however, we recognizethat the world has started to retreat from decades of globalization. The advent of Artificial Intelligence could introduce even Blackbooks: Zara: The Chameleon Queen (2025)LVMH: Trunk Show (2025)Inditex: Zara Is Only the Beginning... A Portfolio of Fashion Chameleons (2024)LVMH King of the Jungle — Redux (2022) DETAILS FINANCIAL COMPARISON ORGANIC GROWTH AND VALUATION Organic growth at LVMH and Inditex has shown a similar trend over the last c. 15 years(Exhibit 1), although Inditex hasoutperformed LVMH across a number of years, notably in the mid 2010s period, and more recently in 2024 and 2025 as theluxury sector has gone through a significant period of normalisation following its strong performance throughout the pandemic. Inditex