Zara Experiences First Ever Quarterly Loss

In the latest of coronavirus-related losses, Inditex suffers its first-ever quarterly loss. The parent company of Zara, proves that no one is immune to the economic effects of this pandemic.

Zara and Inditex

Zara is one of the most successful high street brands and fast fashion companies. It makes up a part of Inditex, a Spanish multinational clothing company encompassing Zara, Massimo Dutti, Bershka, Pull&Bear, Stradivarius, and more. In total, the fashion group operates over 7000 stores across 93 markets. 

Zara Online Sales 

Many shoppers took to the Zara website during lockdown leading to a subsequent 95% increase in online sales in April. This pattern is something the company expects to continue. They predict that a quarter of the sales in 2022 will be online (14% more than 2019). Unlike many UK chains, such as Marks and Spencers, Zara inventory fell by 10%. This demonstrates that demand for Zara fashion was still high as people were confined to their homes. Over Inditex brands in general, e-commerce rose by 50% in the first quarter. Shares in the Spanish fashion conglomerate also rose by 1.9%. 

Quarterly Loss

In spite of this huge surge in online sales, the quarterly loss for the clothing giant was €409 million. This 44% slump was totally unprecedented and the first quarterly loss in company history. Sales for the first quarter of the year were €3.3 billion; this figure was €5.9 billion in 2019. The reason for the huge decline is the closure of 88% of stores worldwide (approximately 6,000 out of 7,000 stores).

Plans for the Future

Inditex plans to spend €2.7 billion over the next three years. They are hoping to expand their most successful stores as well as invest in their online platform. As part of this, they plan to close more than 1,000 smaller branches over the next year. This is likely to affect brands other than Zara and older stores. Closures are thought to be mostly in Asia and Europe. In total, the store count will fall from around 7,500 to around 6,800. These figures include the opening of 450 new shops. In the foreseeable future, the company expects most existing stores to open by the end of this month. 

Cash Flow

The company is at an advantage over many other high street brands, namely due to its cash reserve. Inditex is thought to have an estimated €5.8 billion, compared with €6.7 billion in 2019.