Inditex slump in the quarter and launch a 2.7-billion-euro plan

Inditex slump in the quarter and launch a 2.7-billion-euro plan

Product quality and communication are going to be “Inditex future pillars”. The Spanish company, (which controls, among others, Zara, Massimo Dutti, Pull&Bear and Bershka), has recently launched a strategic plan whose deadline is set by 2022. They will carry out a 2.7-billion-euro investment overall. They will spend one billion euros to enhance the online channel, which is consequently supposed to account for 25% of total sales. In the meantime, owing to Covid-19 detrimental effects, Inditex revenues have slumped: -44.3% in the February-April quarter.

Inditex slump in the quarter

The revenues of Inditex, a leading player in the fast fashion business, collapsed in the quarter, from February to April 2020: at the end of the period, sales reached 3.3 billion euros. In other words, they dropped by 44.3% compared to the same period of the previous year, despite a 50% increase in online sales. Net loss amounted to 409 million euros: this is the first time they have been “in the red” since the group listing. Lower operating costs, -21%, have softened such financial loss.

Business model flexibility

Pablo Isla, Chief Executive Officer of Inditex, has emphasized (as one can read on portal) the flexibility of the company’s business model, with regard to supply in particular. In practice, since the group currently manages its provisions one week in advance, they have successfully reduced their stocks by 30%. “First we stopped purchasing; then, in May, we started up again provisions for June, July and August”.

2.7 billion euros

The giant, headquartered in Galicia, worldwide leader (in terms of overall turnover) in fashion distribution, has launched a new strategic plan (2020/2022) based on a 2.7-billion-euro investment. Such plan focuses on three main assets: digital experience, global integration of physical stores and online channel, sustainability. They are going to allocate one billion euros to enhance digital transformation: the aim is to make online sales account for over a quarter of their overall turnover throughout 2022. Furthermore, they will allocate one billion and 700 million euros to update the embedded platform of their distribution network by adding some “technologically advanced tools”.

Stores, product, quality, prices and sustainability

According to Inditex estimates, their sales outlet network is going to reach 6,700 to 6,900 units all over the world. In other words, 450 selling stores are currently open, while around 1,200 are closed. A financial analyst asked Isla whether Inditex are going to modify their brands’ price policy. Such was his answer: “At present, product quality and communication, rather than anything else, are the top priorities on which we are focusing our efforts”. Not to mention, in addition, “sustainability”. In fact, the group is planning to “promote the reuse and recycling of garments, therefore discarding disposable plastic and consequently augmenting the use of sustainable and recycled fibres”.

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