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Customers leaving a Zara shop in Barcelona. Reuters
Spain's Inditex fashion giant, owner of unstoppable Zara brand, rakes it in with 5billion-euro profit
Retail

Spain's Inditex fashion giant, owner of unstoppable Zara brand, rakes it in with 5billion-euro profit

Despite a major international expansion for the Spanish retail giant in recent years, the company's domestic market is still its strongest area

Clara Alba

Madrid

Tuesday, 19 March 2024, 20:19

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Despite major international expansion for Spanish retail giant Inditex in recent years, with the USA at the centre of this growth, the company's domestic market is still its strongest area. "It is the market where we were born and where we are going to continue," said CEO Óscar García Maceiras, during a presentation of the company's latest results this week.

With a record profit of 5.381 billion euros on a global scale, one of the figures that most surprised the market was the boost in sales, which reached 35.947 billion euros, up 10.4%. Of this total figure, Zara, Pull & Bear, Massimo Dutti, Oysho and the rest of the group's brands sold 5.666 billion euros of goods in Spain, 12.85% more. It is the first time (in the years analysed) that turnover in the country has grown at a faster rate than the global average.

In 2022 year-on-year revenue growth in Spain matched the pace of global sales. However, it has been in the last year that the gap has been more evident. All this has been achieved despite a difficult environment due to inflationary pressure which has seen consumers focussing on food shopping rather than spending on clothing and other consumer goods.

The decline in the purchasing power of Spanish households and the impact of geopolitical tensions have led to a slowdown compared to last year's growth, when turnover in Spain rose by 17%. But the numbers still add up.

Added to this is a number of store closures bringing the number of shops in the country to 1,157; some 68 fewer than in 2022 and 423 fewer than in 2019, the year before the pandemic, when the figure was around 1,535.

Logic would suggest that fewer shops mean lower sales, but Inditex looks at optimisation and the concept of 'fewer shops, but bigger'. The objective? To gain square metres in key locations to make room for different spaces with special collections, collaborations with well-known celebrities, footwear, accessories, sportswear, cosmetics, etc.

This lower number of shops has not had an impact on the workforce in Spain either. In fact the number of Inditex employees currently stands at 47,761, which is 1,607 more than 46,154 last year.

Logistics centres

Inditex's commitment to the domestic market will also soon translate into greater investments. Apart from an investment of 1,800 million euros that is expected to continue with the optimisation of commercial space and technological integration on a global scale, the company has just launched an ambitious logistics expansion plan that will involve an investment of 900 million euros this year and another 900 million next year. Of this figure, "90 per cent will remain in Spain" as García Maceiras indicated.

Among the main projects, in addition to those aimed at improving the Arteixo (Coruña) and Meco (Madrid) centres, a new 286,000-square-metre distribution centre for Zara in Zaragoza is in the pipeline, another 116,000-square-metre centre for Bershka in Valencia and a further 141,000-square-metre centre for Tempe, which is in charge of the footwear business.

"Most of them will start operating in the second half of 2025," according to the company, which was founded by Amancio Ortega. On the importance of keeping production in geographical areas close to its headquarters in Spain the company says, "It allows us to prioritise flexibility and control the entire production process efficiently."

This new investment plan to expand and optimise the shop network and logistical and technological capabilities will result in an increase in net sales area of between two and 3 per cent, according to estimates.

Zara, unstoppable

Zara is consolidating its position as Inditex's flagship brand with unstoppable growth. The brand ended the last fiscal year with sales of 26.050 billion euros, 10% more than the previous year, making up 72% of the group's total sales. This year, Inditex plans to take the brand to new locations, with new shops opening in iconic spaces in Rome, Los Angeles and Las Vegas.

"In addition, we will carry out major extensions and refurbishments in some of our most emblematic shops," the company said in its annual report. These are planned for the store on Milan's Corso Vittorio Emanuele and the Nanjing Road shopping area in Shanghai.

Tempe's strength

This investment commitment will extend to its main logistics centres, where Zara will share the limelight with Tempe. Although its name may be less popular, this company located in the Alicante city of Elche could well be known as Amancio Ortega's 'shoemaker'. The company, which will have a new logistics centre in Valencia, has been in charge of designing, supplying and distributing footwear exclusively for Inditex's different brands for years.

Last year, its profit soared 35% to 142 million euros, according to the company's annual results. Its sales also grew by 7% in the period, to 1.508 billion euros, up from 1.408 billion euros the previous year.

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