Skip to Content
Global News Select

Zara's Owner Will Feel the Chill This Winter

By Carol Ryan 

Zara's owner is having to shut stores again in the crucial run up to Christmas. The fashion retailer's fast-growing online business may not patch the hole as well as might be hoped.

Spain-based Inditex, the world's largest clothing retailer, said on Tuesday that sales over the three months through October fell 10% at constant exchange rates compared with the same period of 2019. The company had almost recovered to precrisis sales levels when the second wave struck. Markets like Spain and Ireland imposed tighter rules on nonessential retailers from mid-October.

With new restrictions coming into force this week in parts of the U.K., Germany and the Netherlands, the question is whether Inditex's digital business -- which is much larger today than it was before the pandemic -- can claw back lost store sales any faster than it did during the first wave of restrictions. The answer seems to be a qualified no based on the data so far.

During the worst of the lockdowns in April and May, three-quarters of Inditex's world-wide shops were forced to close, leading to a 62% drop in sales. In November, 21% of the company's locations were shut, and group sales fell 19%. That performance should have been stronger if the digital business was picking up the slack faster than during the first shutdowns, according to estimates of Inditex's store-based sales by Bernstein analyst Aneesha Sherman.

There are a few explanations. Inditex's digital sales have already grown by 75% in 2020. All those shoppers that were prepared to switch to buying online may have already done so. It is also likely that social distancing rules are lowering purchases in stores that remain open. The company's digital arm isn't big enough yet to offset weaker business in open locations as well as those that are closed completely.

In other respects, Inditex looks as impressive as usual. Inventory levels at the end of October were 11% lower than they were the same time last year. Tightly controlling stock means fewer clothes have to be sold at a discount, protecting profit margins. And net cash of EUR8.3 billion, equivalent to $10 billion, was a record high.

The retailer has done a great job of growing its online business this year, and will be much sharper digitally after the pandemic has passed. In the short term, though, it won't be enough to protect the business from winter closures.

Write to Carol Ryan at


(END) Dow Jones Newswires

December 15, 2020 10:06 ET (15:06 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.