Zara Parent Inditex New Stores In China For The First Time Below The Number Of Closed Stores

The number of Inditex stores in Spain, one of the world's largest clothing retailers, has been decreasing year by year since 2012, closing a total of 297 stores, but the retail area of Zara has not declined.

According to people familiar with the matter, since 2012, Inditex has opened large brand flagship stores in many high-end locations in Spain, so although the number of stores has declined, the total retail area has increased substantially. Although no specific data were released, Inditex's total retail space in Spain continued to grow in 2018.

As the largest clothing retailing market in Inditex, there are more than 1600 franchised stores in Spain, which account for 1/6 of the total sales volume.

Although the number of stores in Spain has been declining, the number of Inditex stores worldwide is still increasing, but the growth rate has begun to slow down. In the last fiscal year, Inditex originally planned to add 300 to 400 stores and close 200. Finally, 370 stores were added, and 355 stores were closed. Meanwhile, Inditex's global retail area grew by 4.7%. It is expected to grow by about 4% this year. It is worth noting that in the 2018 fiscal year, the number of Inditex stores in China was first higher than the number of stores.

"Consumers' shopping habits are changing and online shopping is their first choice," said Alistair Wittet, European portfolio manager at Comgest, France's Asset Management Co. However, large flagship stores are still popular among consumers. Inditex's strategy is to shut down small stores and open more large flagship stores.

For Inditex, expanding the retail area strategy is not only a risk, but also runs counter to the trend of the industry. In particular, with the continuous development of online retailing and the declining profitability of the apparel industry, many retailers have begun to focus on expanding online channels. Many clothing retailers began to "slim down" their property portfolios or close their stores or reduce the size of their stores.

Gap, the US clothing retailer, broke up its brand Old Navy earlier this year, and said it would close its 230 Gap brand stores in the future (see "ornate ambition"): Gap group announced that it had split its brand Old Navy to set up an independent new company, and its share price rose by 16%. The famous underwear brand Victoria 's Secret (the secret of Vitoria), the British high street fashion brand New Look is also starting to reduce the number of stores, but there is no plan to increase the retail area.

Inditex has nearly 7500 stores around the world (about 1/4 of which are Zara stores), two times the parent company of UNIQLO and Japan's fast selling group, and 2500 more than Sweden's fast fashion giant H&M.

At the same time, online channels and digitalization have always been the focus of Inditex's attention. In March 2018, Inditex opened online shopping platforms in Australia and New Zealand. In November, the Zara online sales network expanded to 106 new markets, with a total market of 202.

According to Refinitiv data, in the past six years, the operating profit margin of Inditex has been decreasing year by year: from 19.5% in 2013 to 16.7% last year. However, considering the strength of the euro, this figure is still much higher than that of many Inditex competitors.

In the 2018 fiscal year ending January 31, 2019, Inditex group's sales increased by 3% to 26 billion 140 million euros compared to the same period, and increased by 7% over the same period, which broke the 26 billion euro mark for the first time.

Asset Management Co Vontobel Asset Management fund manager Ramiz Chelat said: "in the current difficult retail environment, the growth rate of 7% is still a good result."