Fast fashion is not going away but it is increasingly going online, at least according to Zara’s parent company. Inditex has reported strong sales growth for the first five weeks of its new financial year and announced that it will slow the pace of store openings as part of a broader trend of sales moving online.
Inditex, the Spanish fast fashion giant, which holds the title of the world’s biggest clothing retailer, says it will focus store openings on flagship sites in prime locations, such as the very newly-opened three-floor Zara store opened in Manhattan’s SoHo neighborhood. Per Reuters, “It will aim for 6 to 8 percent growth in new sales space in coming years, below previous guidance of 8 to 10 percent.” The retailer opened 330 stores in 56 markets in 2015, with a new Zara shop in Hawaii becoming the group’s 7,000th store worldwide. It expanded online sales to Hong Kong, Taiwan, Macao and Australia during the year.
Per Bloomberg: “Inditex reported its fastest annual profit growth in three years as it added stores and expanded online sales.Net income rose 15 percent to 2.88 billion euros ($3.2billion) in the period through Jan. 31, the owner of the Zara and Massimo Dutti brands said Wednesday in a regulatory filing. Analysts expected 2.9 billion euros, according to the average estimate. Full-year sales of 20.9 billion euros matched the consensus.”
Chairman and Chief Executive Officer Pablo Isla said the decision to focus on e-commerce sales is directly tied to the fact that the average spend per customer online was higher than that in stores (Isla said Inditex did not separate online sales from store figures because they were complementary). And analysts have welcomed the slowing pace of store openings, saying that they were “satisfied that Inditex would be able to grow market share with its amended business model.” According to Bernstein analyst Jamie Merriman: “We believe that Inditex has made the right choice to slow space growth,” said. Inditex is clearly able to grow market share with the less capital intensive e-commerce approach.”
Inditex’s net profit came in at 2.88 billion euros ($3.16 billion) for the financial year, boosted by the relative weakness of the euro against a basket of around 60 currencies, in line with the expectations of analysts polled by Reuters.