Analysts at Nomura have upgraded Inditex to a 'buy' rating from 'neutral' after weighing in on the Spanish fashion retailer's higher returns in apparel.

The broker explained that Inditex takes advantage of catalysts like the proximity of its sourcing and its variety of brands.

"We expect that this model will be resilient to the continuing wave of emerging market labour cost inflation," says Nomura.

"Without strong productivity gains we can envisage many garments becoming more expensive to source in Asia in five years' time. This could pose challenges to basic models with high gross margin in our opinion, but not to Inditex."

Nomura said that Inditex generates the highest store EBITDA (earnings before income tax, depreciation and amortisation) per square metre.

It also expects its growth opportunities to remain intact because it will be able to continue growing in China and the United States.

By 10:55 in Madrid, shares of Inditex were up 0.38% to €105.10.

MG

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