Inditex Still Heads the Field
Viewed in the context of its seemingly irresistible rise, progress for Spanish clothing giant Inditex has shown a few signs of slowing of late.
The company announced a 5 percent sales rise to $22.2 billion in fiscal 2013, with comparable sales up 3 percent. Net profit reached $3.16 billion last year, 1 percent more than in 2012.
Results were impacted by negative currency effects — Inditex is heavily exposed to emerging markets, many of which have seen currencies fall against the euro in the past year — as well as costs incurred in revamping its flagship stores.
The retailer, which operates in 87 countries on five continents with brands like Zara, Massimo Dutti, Bershka and Pull & Bear, added a net of 151 outlets last year, taking its global total to 6,340. More than half of last year’s 180 store closures were in Iberia, shrinking the Inditex store network in Spain 4 percent to 1,858 stores.
More links added to the chain
China represents the retailer’s fastest-growing market, with 61 new outlets added for a total of 457. Other expansion markets were Russia, where the Inditex network swelled 17 percent to 386 stores, and Poland with 18 percent growth to 242 outlets. Variety store chain Zara Home delivered the strongest performance, posting 29 percent sales growth. Fashion accessories chain Uterqüe saw sales dip 4 percent.
In terms of performance against arch-rival H&M, last year the Swedish player posted stronger results, marked by higher sales, store openings and profit growth than its Spanish counterpart. However, Inditex bettered H&M’s flat like-for-like growth, maintaining a clear sales lead over the Swedes as well as third-ranked Gap.
Lefties and online gains traction
Lefties was launched in Spain in the early 1990s, selling Zara’s leftover last-season pieces. A continuing economic crisis and a creeping threat from low-cost players like H&M and Primark have powered this brand’s growth, to the point where it now sells its own collections. The strategy is being reinforced with the roll-out of a more enticing store concept that bares almost no resemblance to the original no-frills Lefties.
Inditex has steadily increased the number of Lefties outlets in Iberia over the past five years, often rebranding stores from other more upscale nameplates in impoverished areas that were struggling to meet sales targets. Lefties currently operates more than 100 stores in Iberia, with additional outlets likely to open this year.
A relative latecomer to e-commerce, Inditex has been building its online network since 2010 when its first such operation went live in Spain. With the advent of Zara online iterations in Greece, Russia and Canada in fiscal 2013, Inditex now boasts 25 markets served by at least one of its online shops and more than 5 million daily visitors worldwide. In 2014, online operations are planned for South Korea and Mexico.
This year will see record capital expenditures of approximately $1.85 billion, with 450-500 new stores planned. Some 80-100 stores from all brands but Zara are expected to close this year. Further sales advances are expected in Spain and across southern Europe as the economic situation gradually picks up. Spanish operations — which in 2013 accounted for nearly 20 percent of total sales — are expected to continue their decline as Inditex concentrates its focus on emerging markets.