ZARA HAS EYE ON EXPANSION WITH PLAN FOR MADRID IPO

PARIS — Spanish fashion giant Zara is gearing up for great growth.
The purveyor of mid-tier, trendy sportswear and accessories for women and men, which so far only has scratched the surface of the American market, plans to make an initial public offering on the Madrid stock exchange early next year that should fuel faster expansion.
Zara could be the next major European threat to American retailers, which for years have been anticipating a Zara rollout. But Zara will be playing catch-up to Sweden’s H&M, the higher-profile, low-priced fashion chain that has, so far, drawn strong traffic to its New York-area stores.
Zara’s parent, Inditex, a secretive family-owned holding company based in La Coruna, Spain, and controlled by Zara chairman and founder Amancio Ortega Gaona, said the offering will be between 30 to 40 percent of Zara’s capital.
Zara has not yet indicated which bank or bank syndicate will spearhead the public offering, which is expected to value Inditex at more than $9 billion, or about 50 times last year’s profits.
Inditex posted sales of $1.9 billion last year, up 26 percent from 1998. Profits rose 51 percent to $191 million. (All figures are converted from pesetas at the current exchange rate.)
Apart from Zara, Inditex owns Spanish fashion firms Massimo Dutti, Pull & Bear, Mershka and Stradivarius.
Introducing Zara on the stock market “will facilitate the company’s long-term growth projects,” said a Zara spokesman Monday. “Our strategy is mostly concentrated on building our European business through opening new stores.”
Zara is ubiquitous in Europe but hardly known in the U.S., where it currently operates only six units in the New York area. Its first U.S. unit opened more than a decade ago on Lexington Avenue at 59th Street, opposite Bloomingdale’s. That store is currently under renovation.
Recently the company’s philosophy toward the U.S. changed, from slow expansion to accelerated rollout, as consumers have embraced fast fashion more and more and other European retail powerhouses, such as H&M and Ikea, have made major inroads here in short time spans.
Zara has said it wants to add as many as 40 stores here in the next two years and ultimately have as many as 400 doors.
Last year, an executive told WWD that Zara is looking “for real estate in Boston, Chicago, Miami, San Francisco and Los Angeles.”
Zara shares the same commitment to displaying the kind of fashion trends that could be in Banana Republic or H&M, yet its prices fall somewhere between the two, on a par with Canadian rival Club Monaco.
While all eyes are on Zara’s U.S. moves, the public offering could also help the chain tighten its hold in Europe.
A sophisticated vertical operation, Zara owns factories in Spain that rapidly produce merchandise and ultimately keep stores fresh with new deliveries twice a week.
The runway is not the only place the chain gets its inspiration. The company has a team of designers that travels constantly, visiting hot spots in Europe and the U.S. to find the latest looks.
Zara also plans to make a big push in Germany, where Inditex has an agreement with the Otto Versand Group to open Zara stores in Cologne and Hamburg.
The other Inditex companies are Pull & Bear, classics for men and women at reasonable prices, and Massimo Dutti, described as “basic, traditional styles updated by new-generation fabrics in natural fibers.” Berksha, the newest retail concept, is geared to juniors, with massive stores filled with giant photos and original graffiti on the walls.

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