This case study has been written exclusively for use on the course Strategic Financial Management FINA 1035 at Greenwich University Business School and its partner institutions. It is to be used exclusively for this purpose. No part may be copied , emailed or reproduced for any other purpose other than stated above. Much of the data and material included in the case study is taken from the annual reports and accounts of the Inditex Group, its public statements and from its website .inditex.com. All other sources are shown in the case study. Author : Scott Duncan Lecturer Greenwich University Business School July 2010
INDITEX GROUP – ARE ITS “FAST FASHION” RESULTS SPEEDING UP AGAIN AFTER RECENT SLOW DOWNS ? Intr oduction Inditex Group - the owner of the Zara fashion chain and the world’s largest clothing and apparel group in terms of sales - reported encouraging results for its first quarter of 2010. The Financial Times reported in June 2010 1) : “Inditex lent its weight to hopes of a recovery in European demand as the continent’s biggest fashion chain delivered forecast-beating first-quarter net profits and confirmed it would be moving its fast-fashion offer online later this year. Europe’s biggest clothing chain reported a 14 per cent increase in net sales to €2.66bn ($3.2bn) in the three months to the end of April 2010, as net income rose 63 per cent to €301m in response to, in particular, demand for its sharp-shouldered jackets and draped harem trousers. Sales rose 13 per cent from the beginning of February to June. The uptick comes after Hennes & Mauritz in April raised hopes of recovery in the European retail sector when it also beat net profit expectations in its first-quarter results and reported signs of improvement in the market at the start of the second quarter. Inditex has been upbeat on prospects for the current year, with Pablo Isla, chief executive, predicting that same-store sales growth should turn positive again after a negative 2008 and virtually flat 2009. Mr Isla, who sells a third of all his clothes in Spain, was even upbeat about his home market on Wednesday. “[The] reality in Spain is better than the perception you may have. I personally have a strong confidence in the dynamism of the Spanish economy going forward.” The gross margin, meanwhile rose to 59.9 per cent against 56.9 per cent. “[It is] likely to lead to consensus upgrades,” wrote Andrew Hughes, analyst at UBS, in a note. The shares rose 5 per cent to €46.11. “Despite concerns of slower sales growth into the second quarter and as the year progresses, the first quarter beat [expectations] and stronger gross margin trends should more than compensate,” Mr Hughes added. Analysts also welcomed the news that Zara, which still makes a third of all its sales in Spain, would start trading online at the beginning of September in its main European markets: France, Germany, Italy , Portugal, Spain and the UK. “Online should act as a downward protection for trading news in the second half,” wrote Bernstein in a note.
During the period, Inditex opened 98 stores in 29 countries, taking its footprint to nearly 5,000 stores in 76 nations around the world. Last month, it opened its first Indian shop in Delhi”.
Histor y of Inditex Gr oup
Industria de Diseño Textil (Inditex) makes disposable chic fashions that are here today and gone tomorrow. The Spanish designer-cum-retailer uses technology and an armada of designers to master cheap chic. Inditex sells on a global scale, with over 4700 shops in 76 countries under eight different retail brands each offering different customer propositions :
Stor e Br and
Zara Zara Kids Pull and Bear Massimo Dutti
Pr imar y Offer ing Mar ket 3)
Women’s and men’s clothes. Childrens’ clothes Young women and men’s casual and “laid back” clothes and accessories Men’s and women’s clothes...