PARIS — Inditex SA, owner of the Zara retail chain, said on Wednesday it would not raise prices despite Spain’s decision to raise value-added tax by 3 percent as part of its latest austerity package.
“The Inditex Group will absorb the increase in VAT from 18 percent to 21 percent announced by the Spanish government and will not increase the prices of its products,” Inditex said.
“Inditex absorbed previous VAT increases, offsetting the impact via efficiencies in various areas of its operations,” it added. The price policy extends of all of the group’s chains: Zara, Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterqüe.
Inditex has been gradually reducing its reliance on the domestic market, which is in the grip of a double-dip recession and saw its jobless rate increase in May to 24.6 percent, the highest level in the European Union.
Spain accounted for 25 percent of Inditex’s total sales in 2011, versus 28 percent in the prior-year period, while Asia and the rest of the world represented 18 percent, up from 15 percent previously. Nonetheless, Inditex chairman and chief executive officer Pablo Isla said last month he was confident in Spain’s future.
“I fully believe that the effect of the reforms that are being adopted will start to become evident in the coming quarters,” he said during a conference call with analysts, after the company announced its net profits jumped 30 percent in the first quarter of fiscal 2012.
Unlike other fast-fashion players, Inditex manufactures a significant portion of its products at home. The group is investing 290 million euros, or $356 million at current exchange, into expanding its domestic headquarters and production facilities to keep pace with its global expansion.