The Parent Company'S Performance Is Not As Good As Expected. Can Zara Help To Reverse Its Declining Trend?

Spain's fast fashion giant Zara has recently closed its stores to two core business circles in Beijing, one is the Raffles shop in Dongzhimen and the other is the new Dongan store in Wangfujing. As for the specific reasons for the withdrawal, there is no official statement. In the industry view, the current fast fashion has bid farewell to barbaric development, ushered in the stage of differentiation and development. In this context, can Zara parent Inditex group continue to "bet" Zara, relying on its performance decline?

According to the reporter, from the current situation, the Inditex group of Zara parent company has not gone out of the haze of the slowdown in performance. In the first half of July 31st this year, Inditex group's sales and net profit are still at a low growth stage. The results showed that sales increased by 7% to 12 billion 820 million euros (100 billion 400 million yuan) in half a year, and net profit increased 10% to 1 billion 550 million euros (about 12 billion 160 million yuan). Although the management of Inditex group said that the above two indicators broke the record of semiannual growth rate, the gross profit margin of the company in the first half of the year was lower than that of analysts, which increased by only 0.1 percentage points to 56.8% over the same period last year. After the announcement of the earnings report, Inditex group's share price fell more than 5%, the biggest decline in six months.

It is worth noting that from the 2015 fiscal year, Inditex group's net profit growth is declining year by year. The company's profit in the 2015 fiscal year increased by 14.9%, the net profit in fiscal 2016 increased by 10%, and in the 2017 fiscal year increased by 6.7%, compared with 2% in the 2018 fiscal year.

In order to boost performance, since last year, Inditex group has made a lot of efforts, and the focus of self-help is reflected in the layout of Zara. In order to improve the image of stores, Zara opened a flash store in London last year and landed the first retail concept store in Shanghai. In the first half of this year, Inditex group renovated and expanded its more than 100 stores. In September 12th, the world's largest single storefront Zara store opened in Dubai Mall, covering an area of more than 5000 square meters. At the same time, Zara Madrid store is reopened, which covers an area of 4000 square meters. In addition, Inditex group announced that it will upgrade the store image of Zara Home and children's clothing next year. The layout of the store will be more neatly and modern, so as to attract more consumers to stop.

However, the expansion and upgrading of stores also bring some burden to the company. According to the data released by Inditex group, the rental cost of the company's operating entities increased by 1.4% to 2 billion 392 million euros (18 billion yuan) compared with the previous year, accounting for 10% of the total revenue.

In addition to store expansion, Inditex group will devote more effort to online channels. It is reported that in November last year, Zara launched online shopping channels in 106 markets worldwide, developing intelligent operation system and direct mail system, and building a 90 thousand square meter logistics center in Spain headquarters. Pablo Isla, the chairman of the Inditex group, said that Zara entered the electric business field later, but also less than a lot of detours.

At present, Zara will try door-to-door service in the Chinese market, and will expand to other markets in the future. According to Pablo Isla, the company will be able to integrate offline and online storage next year.

However, Morgan Stanley analysts have said that although Inditex group's business model is still differentiated, but as Amazon and other business giants continue to overweight clothing industry, Zara's competitive edge in the market is declining.

In addition, the Inditex group is still forging ahead in other areas. In February this year, Zara launched make-up products to enter the beauty industry. The home brand Zara Home will also be integrated into the Zara brand. The management of Inditex group says that the long-term goal is to make Zara Home the fourth largest business of Zara.

Relevant experts of the China Clothing Association told the China Commercial Daily reporter that although Zara has entered a new field, it has gained some market attention. But from the point of view of production and operation, the relevant products are not competitive enough. If we want to rely on new businesses to improve the company's performance, it is not difficult.

Public information shows that Inditex group was founded by Spain's richest man Oman Theo Ortega in 1963. Its brands include Zara, Bershka, Massimo Dutti, Pull&Bear, Stradivarius, Zara Home, Oysho and Uterque, which are truly fast fashion groups.

In recent years, with the upgrading of consumption, many consumers are gradually abandoning the fast fashion products with poor quality, and turn to brands with strong design and better quality. Insiders say that fast fashion has already bid farewell to the stage of barbaric development and usher in a new stage of differentiation and development. Against this background, it is hard to say whether Inditex group can rely on Zara to reverse the decline of performance growth rapidly.