Inditex: Seven brands and a long-term strategy
today Sep 16, 2019
Inditex is pushing hard for the fully integrated onmichannel model. Based on a combination of online growth, physical expansion in prime locations and innovative technology, the model should guarantee the golden future envisioned by the Spanish group. And the company founded by Amancio Ortega is reaping the rewards of this strategy. Revenues increased by 7% to 12.82 billion euros ($14.1) in the first six months of the year, during which, according to Pablo Isla, the company continued to develop its long-term strategy. We dive deeper into the group’s accounts and its plans for its seven brands.
STRADIVARIUS AND UTERQÜE, THE LEADING CONCEPTS
The chains specialised in young and “high end” fashion are driving growth at the group, with both brands being the only ones in the Inditex portfolio to report double digit growth during the period. Inditex chairman highlighted Stradivarius’ strong growth. The brand experienced a sales increase of 12.5% to 776 million euros, helped by the opening of its first store in Belgium and the arrival of Javier Eguirón as chief financial officer.
Uterqüe is the group’s smallest brand, but it is growing faster than all others. In the first half of the year, it saw revenues reach 52 million euros, up by 13% on the prior year’s period. Additionally, the label presented a collaboration with American makeup brand Bobbi Brown in recent months.
Pablo Isla also highlighted “the optimisation of Bershka and Pull&Bear”. Bershka grew by 3.3% to 1.08 billion euros while Stradivarius was up by 2.6% to 873 million euros. Both brands continue to be the most valuable brands after Zara. Pull&Bear continued to expand across Europe, making its debut in Luxembourg, opening a store on Rue d'Antibes in Cannes, and teaming up with Primavera Sound Festival in Barcelona.
Massimo Dutti, the fourth largest chain in terms of revenue, reported sales of 844 million euros, up 4% year-on-year. Last week, the aspirational label hosted an exclusive runway show in its Barcelona flagship store to unveil the latest collection. Meanwhile, Oysho has entered Luxembourg and continued to expand its sportswear offering. The lingerie and loungewear brand is the smallest in the group after Uterqüe, with revenues increasing by 3.8% to a modest 301 million euros.
ZARA, THE UNDENIABLE WINNER
Inditex’s core brand continues its rise. Sales at the trend-led chain grew 7.3% to 8.89 billion euros in the first half of the year, representing 69% of the group’s total revenues. By comparison, Sweden’s H&M Group reported sales of 10.29 billion euros during the same period.
Inditex is continually reviewing the brand’s strategy, and has recently announced a revamp for Zara Man and Zara Kids. The new visual identity has not yet been revealed but it follows the launch of Zara’s new logo earlier this year.
Zara has expanded its online presence to 15 new countries and markets, and it has further launches in South Africa, Ukraine, Colombia and the Philippines in the pipeline. Additionally, the integration of Zara Home into the Zara website will start in the United Kingdom this 17 September.
New Zara stores opened in Rome, Warsaw, Timisoara (Romania) and Pamplona, and two superstores closed in Dubai Mall and Preciados, Madrid.
Across the group, new stores opened in up to 31 markets, coupled with hundreds of refurbishments and extensions. Inditex said it had 7,420 stores in 96 countries. By geographical regions, Europe (excluding Spain) continues to be the largest market, accounting for 44.4% of revenues, followed by Asia (24%), America (16%) and Spain (15.6%).
WHERE DOES INDITEX INVEST ITS MONEY?
“I want to highlight investments made both in stores and in logistics and technology, which are a key element in the development of our integrated platform,” said Pablo Isla during a conference call. It was the first time the group’s new CEO Carlos Crespo was in attendance.
RFID technology helps connect this integrated system, where stores and online platforms share inventories to achieve more efficiency. The system is already up and running at Zara, Massimo Dutti and Uterqüe, but the rest of the brands will have to wait until 2020 for its implementation. The group’s digital programme is complemented with the redevelopment of the group’s logistics centres. Work is currently underway to deliver a new 31.5 million euro content production facility for Zara.com in A Coruña, Spain, as well as a distribution hub in Lelystad, the Netherlands which is set to be partially operational by the end of this year. Additionally, work has begun on an extension of the company’s tech and data processing facilities in A Coruña, Spain.
Looking ahead, Inditex remains confident in its ability to achieve a like-for-like sales growth of between 4% to 6%. It comes after a strong first half and what Pablo Isla has described as a good start of the Autumn Winter season. He has reason to remain upbeat, as he said the group has not been affected by the current discount war taking place amongst fashion brands. “Most of our sales are full price,” he explained. More details of the group’s performance will be released in a third quarter update on 11 December.