ZARA SLOWS U.S. PLANS TO FOCUS ON EUROPE
Byline: James Fallon
LONDON — What’s up with Zara in the U.S.? Apparently, a lot less than once believed. Inditex, the Spanish parent of fashion retailer Zara, may be putting the brakes on U.S. expansion plans. Zara currently operates six stores in the New York area and company executives told WWD last year that as many as 40 stores over the next two years were planned, with the ultimate goal of 400 doors.
But at the opening of an 11,000-square-foot Zara store on Oxford Street here last week, an Inditex spokesman told WWD, “Our focus is on growing in Europe. We want to open and consolidate our different markets and chains in Europe. In future, we are excited about the opportunities in the U.S. and we definitely will open more stores there. But, we are thinking that the U.S. is such a large and unique market that we need to decide and plan a project just for the U.S. We need to focus on that market by itself after we have grown in Europe.”
The spokesman declined to reveal a timetable for more openings in the U.S.
Another Inditex executive later claimed the slower opening program didn’t represent a change in strategy, though he acknowledged, “We will have a slower expansion in the U.S. than in Europe.
“When we talked a year ago about opening 30 to 40 stores it wasn’t meant to be a target,” he added. “It was meant to show how many areas we thought could have a Zara store given the size of the U.S. market. We have no specific plans for the U.S. at this moment. All our efforts are focused on consolidating our markets in Europe.”‘
Recently, other European chains have shown great interest in the U.S., most notably Hennes & Mauritz, the Swedish fashion chain, which is rapidly opening stores in the East. Sephora, the French cosmetics and fragrance giant, has an accelerated growth program for the U.S. and has rapidly launched units in many parts of the U.S. And Carrefours, the French hypermarket and the world’s second largest retailer, has long been rumored to be seeking to enter the U.S. market, possibly through an acquisition, However, at a retail conference last month in New York, the company said its focus remains outside North America.
The Zara on Oxford Street is the company’s seventh store in the U.K. There are 1,001 stores operated by Inditex around the world under all its formats. In addition to Zara, Inditex owns the Pull & Bear, Bershka, Massimo Dutti and Stradivarius chains.
Despite uncertainty about the U.S. Inditex, based in La Coruna, Spain, is by no means slowing its expansion program. The company had 922 stores in 30 countries at the end of its last financial year and expects to have 1,070 stores in 35 countries by the end of this year. New markets it will enter this year include Austria, Denmark, Andorra, Qatar and Luxembourg.
The engine of that growth continues to be Zara, which accounts for 80 percent of the group’s profits and sales. Zara will open another two stores in the U.K., in London and Milton Keynes, over the next few weeks. It also will open four Zara units in Germany this year, bringing the total there to six. Another eight to 10 Zara stores will be opened in Germany in 2001. Zara also will open additional units in Vienna and Copenhagen before the end of the year.
Inditex also has begun pushing its other chains outside of Spain, with the opening of seven Bershka stores in Mexico this year, the launch of Stradivarius in Kuwait, Dubai and Saudi Arabia and the opening of the 10th Pull & Bear store in Japan.
Inditex last year reported a 35 percent increase in net income to $179.1 million on a 26 percent rise in sales to $1.77 billion. The Inditex spokesman confirmed the firm still plans to hold an initial public offering of about 30 percent of its shares during the first half of 2001. The shares will be sold by the privately held company’s family shareholders, including its founder and chairman Amancio Ortega Gaona, the spokesman said.
The offering is aimed at providing liquidity in the shares of Inditex. The proceeds of the IPO will go to the heirs of the existing shareholders who are not involved in the business, the spokesman said.