Under the new coronavirus epidemic, the fashion industry is not the worst, only worse. But this time even the former world’s richest man, Zara founder Amancio Ortega, couldn’t hold on.
After handing in a quarterly report with a loss of 409 million euros (approximately 3.2 billion yuan), Zara parent company Inditex reported that it planned to permanently close 1,000 to 1,200 of its stores, equivalent to 30% of its total global stores. 13% to 16%.
What will happen to the company’s performance after the store is closed? Inditex is targeting e-commerce channels and will focus on online live streaming.
A quarterly loss of 3.2 billion plans 1,200 stores
As one of the world’s largest fashion retailers, Inditex Group has been hit hard by the epidemic.
According to its latest financial report, in the three months to the end of April, Inditex’s sales fell 44% year-on-year to 3.3 billion euros (approximately RMB 26.4 billion), gross profit margin dropped to 58.4%, and operating profit It only recorded 484 million euros, compared with 1.7 billion euros in the same period last year. It also recorded a net loss of 409 million euros for the first time in history, compared with a net profit of 734 million euros in the same period last year.
The picture shows the main performance data of Inditex Group in the first quarter
Key words We know that Zara, founded in 1963, was still on the fast track of growth until last year. In the 12 months ended January 31, the group’s sales increased by 8% year-on-year to 28.3 billion euros, an increase from the 4% growth in the previous fiscal year, mainly due to the 23% increase in e-commerce revenue to 39. Driven by 100 million euros, net profit increased 6% to 3.6 billion euros.
However, the industry was not surprised by Inditex Group’s report card.
In addition to Zara, the Inditex Group’s brands also include Bershka, Massimo Dutti, Pull&Bear, Stradivarius, Zara Home, Oysho and Uterque.
During the reporting period, due to the epidemic, more than 88% of Inditex Group’s stores were closed. As of the end of April, the group had only 965 stores operating in 27 markets around the world, less than 1/7 of the total. Inditex Group emphasized that since May, the company’s sales have improved and most markets have gradually resumed operations.
Inditex Group admitted that although the spring and summer products of its brands in 2020 have been well received by the market, large-scale store closures still have a serious negative impact on performance.
It is worth noting that the Inditex Group has also proposed the largest store closing plan in history. It will close up to 1,200 stores in 2021, mainly targeting small stores and profits of brands such as Zara, Massimo Dutti and Pull&Bear. Stores with a capacity of less than 260,000 euros.
According to the Southern Metropolis Daily, Inditex China’s public relations department stated that the sales of stores that will be closed in the future will account for 5% to 6% of total sales. Most of these small stores are older and mainly sell brands other than Zara owned by the group. The locations of these stores are not ideal enough to provide a commensurate shopping experience.
Information map, picture source: Photo by reporter Zhang Jian
Spending 1 billion euros on e-commerce
Zara headquarters will open a 64,000-square-meter online live broadcast room
It is worth noting that Inditex Group’s online sales increased by 50% in the first fiscal quarter compared with the same period last year, and by 95% in April. In May, the company’s store and online sales in local currencies still fell 51% year-on-year, and the year-on-year decline from June 2 to 8 was 34%. In markets where lockdowns have been fully lifted, the company’s sales revenue fell 16% year-on-year.
In order to speed up the transformation, Inditex Group will also invest 1 billion euros and bet heavily on the digital field. It aims to increase the proportion of e-commerce revenue from 14% to 25% in 2022 and introduce IC for all brands. Labels, greatly improving the inventory management efficiency of stores, etc.
It is reported that by the end of this year, Zara will open a 64,000-square-meter online live broadcast room at its headquarters. The company expects that better-located stores combined with online marketing will increase same-store revenue by 4% to 6%.
Picture source: Visual China Earlier, some media clearly pointed out that the global clothing retail market continues to face major structural challenges, and Inditex Group is no longer firmly in the market. Although it has the best position in the market, its huge stores of nearly 7,500 stores have become a burden, and the growth momentum of retail channels has reached the ceiling.
Cheng Weixiong, a textile and clothing brand management expert and general manager of Shanghai Liangqi Brand Management Co., Ltd., said in an interview with a reporter from China Business Daily that due to the impact of the epidemic, the income of terminal stores in the clothing industry has decreased, which is a big problem for international fast-food companies like Zara. The impact is even greater for fashion brands.
We noticed that the share price of Inditex Group has fallen by 22% since the beginning of this year, and the latest market value is approximately 75.84 billion euros.
Affected by the decline in Inditex Group’s stock price, Amancio Ortega’s net worth has also shrunk to a large extent.
According to the latest Forbes real-time rich list, Ortega is currently worth US$65.6 billion. Although he is still the 8th richest person in the world, he is still 79.5 billion US dollars behind when he was crowned the world’s richest man in 2015.Wealth has shrunk by US$13.9 billion.
On-site visit: Consumers said closing the store will not have any impact
According to Southern Metropolis Daily, reporters visited some Zara stores in the Tianhe CBD area of Guangzhou on the 12th. At the Teemall Zara store, the scene was bustling with people, and there was a long queue at the door of the fitting room as always.
In two Zara stores, Tianhe City and Tianhuan, some consumers told reporters that they had not heard about the store closures. Ms. Chen, who just made the purchase, said that if Zara completely switches online in the future, she may not buy it again. “Their clothes are suitable for thin people and have relatively high requirements on body shape. If you don’t come to try them on, it’s easy to get into trouble.”
Tianhuan At the ZARA store in the square, there was a long queue in the fitting room. Image source: Southern Metropolis Daily
“Even if it really closes the store, it will not have any impact. I will go shopping at Uniqlo and H&M.” Ms. Zhang said, if it is When shopping online, I will also buy nice-looking clothes.
In addition, according to China Business Daily, some consumers seem to be more concerned about whether Zara’s discount season in June this year can arrive as scheduled. It is reported that Zara usually launches end-of-season clearance promotions in June and December every year. Most of the biggest discounts will appear at the end of the month, and the lowest can reach about 30% off. Many consumers told reporters that they would choose to purchase multiple products during Zara’s end-of-season clearance. Many consumers also said that the quality of Zara’s products is average and one product will be eliminated after one season, so they choose to buy it during the end-of-season clearance. It will be more cost-effective. </p
