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Friday 23 June 2017

Zara boosted sales by rapid reaction to warmer autumn

Models in some of the clothes from Zara’s autumn/winter collection
Models in some of the clothes from Zara’s autumn/winter collection

Angus Berwick

Inditex, the world's biggest clothing retailer and owner of Zara, used its "fast fashion" model to adapt to warmer than usual autumn weather, speeding up its sales growth in recent weeks and staying ahead of slower-moving rivals.

Unlike the Spanish firm, Abercrombie & Fitch and Gap posted dismal fourth-quarter sales last month.

Inditex reacts to changing fashion trends and weather by keeping its manufacturing bases close to its distribution centre in Galicia, northern Spain. Items are designed, made and shipped to stores often in less than a month, boosting profitability.

Net profit for the nine months to the end of October was up 9pc from the year before at €2.2bn, in line with analysts' forecasts, as garments such as velvet dresses, military blazers and mini-skirts helped push Inditex sales up by 14.5pc in local currency terms.

With more than 7,200 stores in 93 markets, Inditex has shifted from multiple new store openings to setting up large flagship stores in key locations and tying in its online business instead.

Apart from Zara, which makes up two-thirds of sales, its brands include younger fashion chain Pull&Bear and upmarket label Massimo Dutti.

Other retailers have been trying to speed up their supply chain to match Inditex but are held back by their sourcing from Asia, stretching lead times. They have also started investing in new higher-margin brands.

But Inditex has scope to expand further, according to analysts at Macquarie who say it has a 2pc share of a fragmented market. (Reuters)

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