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Inditex continues focusing on store openings to boost growth

Inditex is still betting on its network of physical stores to drive growth. Though the Zara owner has shrunk its network in its home market of Spain by 15 per cent since 2012, the company has actually increased its overall selling space in Spain since 2012 by opening or expanding flagship outlets in prime locations. Inditex has nearly 7,500 stores globally, over a quarter of which are those of Zara.

Inditex is the world’s largest clothing retailer. Inditex’s net retail space in Spain increased in the last financial year on an annual basis. The retailer is bucking the trend in an industry where companies are shrinking their real estate portfolios, either by shutting shops or reducing store sizes. Shoppers are increasingly chasing bargains online, industry profit margins are declining. In fact Inditex’s business has been built on a rapidly expanding store network. The thinking behind the Inditex strategy is to close the secondary stores and enlarge and improve their flagship stores.

This year, the company expects growth of around four per cent. It has more than doubled sales over the past decade. However, Inditex’s operating margins have fallen in each of the past six years, from 19.5 per cent in 2013 to 16.7 per cent last year.