In 2020, the online sales of Inditex Group, the parent company of ZARA, increased by 77% to 6.6 billion euros, accounting for more than 30% of the group’s total annual sales. This means that the Spanish fast fashion company has achieved the goal set before the epidemic two years in advance. Fueled by the new crown epidemic sweeping the world in 2020, Inditex Group has accelerated the integration of global retail networks and digital channel inventory management.
Inditex Group’s 2020 annual report released on March 10 predicted that the fast fashion company’s online sales will show explosive growth in 2021. As of January 31, 2021, ZARA has launched e-commerce platforms in 25 regional markets around the world, and the number of active ZARA mobile users has reached 132 million. The eight brands of Inditex Group can already sell products to consumers in 216 countries in 91 markets around the world through online platforms.
Inditex Group owns many fast fashion brands such as ZARA, Massimo Dutti, and Bershka. During the 12-month reporting period, Inditex Group’s total full-year store and online sales fell 24.5% year-on-year to 20.4 billion euros. Considering that as of the end of the reporting period, one-third of its stores were still closed, and 52% of its store openings were still subject to epidemic prevention restrictions, Inditex Group’s business model of digital transformation is considered effective by analysts.
Inditex Group will realize that goods in stores and e-commerce channels come from the same inventory system in 2020. Inditex Group Chairman Pablo Isla said in a conference call that day, “This was impossible five years ago. .”
Picture source: Visual China
Analysts remind that the transformation of Inditex Group’s business model means that it will be exposed to In a market environment with more intense price competition. In other words, the competitors of ZARA and its sister brands will not only be H&M and Uniqlo, but also cross-border e-commerce platforms such as SHEIN.
But Pablo Isla believes that this will not be a problem. Although sales fell sharply throughout the year, Inditex Group maintained its gross profit margin at 55.8% in 2020, almost the same as the 55.9% gross profit margin in 2019. It shows that Inditex Group achieved significant cost reductions during the epidemic by streamlining its retail network and strictly controlling operating expenses, and its flexible supply chain model also ensured the normalization of the group’s operations. Pablo Isla said at the above meeting that Inditex Group’s goal in 2021 is to maintain a stable gross profit margin.
Inditex Group achieved a full-year net profit of 1.1 billion euros in 2020, a 70% drop from the same period in 2019. However, after suffering losses in the first fiscal quarter of 2020, Inditex Group turned a profit in the second fiscal quarter and achieved profits for three consecutive quarters.
However, sales and profit performance in the fourth fiscal quarter were not as good as in the third fiscal quarter and lower than analysts’ expectations. Richard Chamberlain, an analyst at investment bank RBC Europe, said that the fourth quarter “looks weak.”
However, Inditex Group’s performance in February and the first week of March 2021 made analysts quite optimistic optimism. The financial report shows that Inditex Group’s store and online sales in February 2021 have reached 85% of February 2020, and 96% of March 2020 sales have been achieved in the first week of March.
Data source: Inditex Group Picture source: Inditex Group financial report screenshot
Considering that February to March 2020 happens to be The epidemic has caused Inditex Group’s sales to turn from growth to a watershed, and Inditex Group’s prospects in the first quarter of 2021 are more optimistic. Inditex Group expects that online sales will grow at a similar rate to the previous year in the first fiscal quarter of 2021, and that all the group’s stores will resume operations by April 12.
Inditex Group stated in its financial report that it will continue to invest 1 billion euros in digital channel transformation in the next three years. On the day the financial report was released, Inditex Group’s share price did not fluctuate significantly, rising only 0.79% as of the closing time. Inditex Group’s share price has risen 13% in the past month.
Although ZARA’s parent company seems to have figured out a clearer development direction from the haze of the epidemic, the epidemic has also caused it to lose its position as the world’s largest apparel company in terms of market value. The total market value of Japan’s Fast Retailing Group, the parent company of Uniqlo, has surpassed Inditex Group, becoming the world’s largest apparel company by market value.
According to previous reports, on the one hand, the epidemic has sharply reduced consumer demand for fashionable clothing. , the demand for comfortable home clothing has increased significantly, which has caused ZARA, which focuses on fast fashion, to lose the favor of a large number of consumers.
On the other hand, ZARA, which focuses on the European and American markets, has fewer stores in the Asian market, accounting for only about 20% of the total number of stores worldwide. This has already recovered in the Chinese market last year, while the European and American markets have been in a long-term epidemic blockade period, which is very detrimental to ZARA. On the other hand, Uniqlo’s main market outside Japan is China. After the epidemic, UNIQLO increased its efforts to expand stores in China. By the end of September 2020, the number of UNIQLO stores in mainland China increased to 782, exceeding the total number of stores in Japan.
Inditex Group is accelerating model reform in the Chinese market. In addition to reducing the number of new main brand ZARA stores, Jiemian Fashion previously reported that Inditex decided to close its flagship store.��All store closures for the three Bershka, Pull & Bear and Stradivarius brands in China will be completed by mid-2021. Isla, chairman of Inditex Group, recently stated at the financial report conference that these fast fashion brands targeting younger consumers will all be sold exclusively through online channels in the future. </p
