PARIS — As Zara-owner Inditex shows signs its digital bet is paying off with improved margins, the fast-fashion giant is also quietly staking out new territory for future growth outside the realm of apparel.
The company was busy over the quarter, rolling out online platforms backed by state-of-the-art logistics systems to new markets around the world — nine in the past three months — but it also introduced a new activity: home products geared to business customers. Summing it up, the Zara Home web site — which was folded into Zara’s online apparel offering in March — advertises a new “Business” activity, with made-to-measure products, including customization to “match your corporate image,” shipping and even an extra service, styling.
It’s the latest sign the lifestyle wave, which has swept couches, secondhand books and easy chairs into fashion boutiques across the spectrum, is also creeping further into the online market, with digitally savvy brands betting on the growth potential of home goods.
Inditex, which also operates labels Massimo Dutti, Bershka and Pull&Bear, has been blazing its path to the future with powerful digital platforms, which it plans to make available everywhere in the world by next year, combined with lightning-speed deliveries thanks to integrated online and in-store stocks. The group is also chasing full-priced sales in a bid to avoid the slippery slope of price-slashing, a pitfall common with lower-end brands that eats into margins.
Inditex Thursday posted a 5 percent sales rise for the first quarter and improved margins, with executives highlighting momentum with the digital transformation of the integrated store and online sales systems, and noting tight control of inventory.
Flexibility and fast reaction time were a major factor in the performance, executives said, speaking to analysts about the quarterly results in a conference call.
“What is key for us is this idea of executing this business model, the flexibility, the ability to react — our business model is based much more on the idea that we know what our customers want, because of this flexibility, the ability to react and this integration between our suppliers — this very efficient logistics that we have. When we know what our customers want, we try to deliver what they want in a very short period of time,” said Inditex chief executive officer Pablo Isla. “This is the very essence of our business model,” he added.
Sales for the Feb. 1 to April 30 period totaled 5.93 billion euros, a 5 percent rise. The fast-fashion retailer also gave figures for the May 1 until June 7 period, noting a 9.5 percent rise in local currencies, suggesting momentum is building as the company starts to see the benefits of investments in state-of-the-art logistics systems and store revamps.
Executives said the growth beyond the first quarter was well-balanced from a geographic point of view.
Net profit amounted to 734 million euros, a 10 percent increase, year-on-year, while margins increased 61 basis points to 59.5 percent.
In a research note to clients, analysts at RBC Ltd. said the quarterly performance was “reassuring overall in a context of a tough recent industry environment.” The analysts noted that full-price sales were strong in the quarter and that “operating leverage is coming through.”
The company is also focusing on sustainability, and said in its earnings statement Wednesday that it added a sustainability committee to its board of directors and noted collection containers for used clothing have been installed in stores across 25 markets.
Initiatives to raise the profile of its brands include a streetwear-inspired Pull&Bear collection with a sustainable bent and linked to the music industry, a team of sports ambassadors for the Oysho Sport label, including Spanish surfing champion Garazi Sánchez and testimony from women on their “super powers” at the label Stradivarius, which has a YouTube channel with 30 million followers called “The Fashion Reality.”
Over the first quarter, Inditex rolled out its online platforms in Morocco, Egypt, Lebanon, Israel, Serbia, Indonesia, the United Arab Emirates and Saudi Arabia.
Next on the list for Zara are South Africa, Dubai, Qatar, Colombia, the Philippines and Ukraine.
The group aims for sales growth at a level between 4 percent and 6 percent sales growth.
Last month, Isla named Carlos Crespo, the group’s chief operating officer, as the future ceo of Inditex. The appointment of the executive, who has been deeply involved in the digital push, will be voted on at the company’s shareholder meeting in July.