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Zara's owner Inditex bucks the Spanish trend and gets bigger(Observer (UK) Via Acquire Media NewsEdge) It may not be a favourite of those with wide waistlines, but Inditex, owner of the Zara fashion chain, now comes in extra large. This week the La Coruna-based fashion retailer overtook telecoms company Telefonica and a host of beleaguered banks to become Spain's biggest listed company. With a market capitalisation of euros 40.5bn (pounds 32.36bn) at close of play on Friday, Inditex is now worth euros 300m more than Santander, the international bank, and euros 190m more than Telefonica. It's another landmark for the Spanish clothing company's founder, Amancio Ortega, the world's fifth richest man, who still retains a 59% stake in the company. Ortega, the son of a railway worker, left school at 14 to work as a delivery boy for a shirt maker. In 1963, aged 27, he used his savings of 5,000 pesetas to set up Confecciones Goa with his then wife Rosalia Mera, making dressing gowns and lingerie. He opened his first store, Zara, in La Coruna in 1975 and developed it into a global powerhouse. The company saw sales rise 10% last year to euros 13.8bn and made net profits of euros 1.9bn, up 12% on the year before, despite the global downturn. Inditex listed on the Spanish stock market in 2001 at a value of euros 9.1bn, and it has more than quadrupled in value since then. Now 76, the publicity-shy Ortega stepped down as head of Inditex last July and is worth about $37.5bn (pounds 25bn), according to Forbes. His empire extends to more than 5,500 stores in 82 countries and eight retail brands including Massimo Dutti and Pull & Bear. It opened its first UK store, a Zara, on London's Regent Street in 1998 and now has 95 shops across Britain. Inditex's global reach, broad appeal to shoppers at the top and bottom of the market and highly efficient business model have made its shares a safe haven for Spanish investors. Although Inditex's Spanish home market is in trouble, most analysts and investors believe the retailer can hold steady there. With its Zara chain controlling just 6% of the market, it has the opportunity to steal share from rivals as wealthy shoppers trade down to its cheaper prices. That belief will be tested on 13 June when the company delivers its next set of quarterly results. Paul Rossington, a retail analyst at HSBC, says: "There would have to be a substantial decline in the Spanish market before it materially impacted on Inditex. The current climate is only helping big chains like Zara." Inditex's shares have fallen slightly in recent months amid concerns for its stores in Italy and Greece. But confidence has held up because Inditex is expanding quickly in China and other fast-growing developing markets. This year, Inditex is expected to open about 500 new stores, about half outside Europe's troubled economies. Lorna Hall, senior retail analyst at trend forecaster WGSN, says Zara's aspirational fashions ensure it has a warm reception in new markets. "Its collections are very influenced by catwalk looks and that has a global appeal," she says. Inditex, which does not advertise, produces a third of its clothing in Spain, where it largely controls and owns its factories. A third is produced in countries nearby such as Turkey, and a third in the Far East. By sourcing closer to its shops and centralising distribution in Spain, Inditex can get a new item to the shop floor in just two weeks so that its stores are more likely to be in tune with the latest trends. Inditex also works closely with its store managers, who feed back information about what is selling to help fine-tune the latest ranges. That attention to detail has served Inditex well as it has spread around the world - insulating it against costly fashion mistakes in new markets. Captions: Success in China has kept Zara steady. (c) 2012 Guardian Newspapers Limited. |