Zara Sells High In China And Loses Money In Korea

Although the European market is relatively cheap, the main market still has a premium of more than 20% compared to the Spanish market. The largest single market of Zara, the German market, is 124% of the Spanish market price. The German market price is the same as that of the Italy market, even though the French market price closest to the Spanish market price is 22% higher than that of Zara in the domestic market.

In the first quarter or 2014 fiscal year, InditexSA showed strong performance. As of the end of April, InditexSA net profit increased by 28.3%, the largest increase in more than two years. The net profit of the world's largest apparel retailer increased from 406 million euros last year to 521 million euros, exceeding the market expectation of 5.05-5.10 billion euros.

Core earnings EBITDA increased by 22.3% to 895 million euros per year, with a market forecast of 888 million euros.

Net sales totaled 4 billion 374 million euros, slightly higher than the 4 billion 330 million euros expected by the market, up 16.7% from 3 billion 748 million euros a year earlier, and 13% at the constant exchange rate.

The circulation of Spanish is rather slow. A report on the global pricing of Zara products has been followed by Korean and English media in the last two weeks after more than 10 days. However, the Zara, which was born in Spain, is popular all over the world with its flagship product of the first fashion group, and its fast fashion and logistics speed is much faster than that of Spanish news.

ElConfidencial quotes the research data of Morgan AlphaWise and Research Institute AlphaWise, which is based on the 7000 products pricing of online shopping in 14 main markets of the world, ranking the price of Zara in the world's major markets. The ranking is based on the market price of Zara in the western market, which is priced at 1, and the price in other markets is compared with that in the other 7000 markets in the world. The price of the product is 1.

Data show that Zara is the most expensive price in Korea, which is 195% of the Spanish market price, that is, almost two times the price of the Spanish market. Surprisingly, the US market is also selling at the same high price, which is 192% of the price in the Spanish market, and also close to two times. The Chinese market is 178% of the Spanish market price, Russia is the 176% price of the Spanish market, the Japanese market is 162% of the Spanish market price, and the India market is 153% of the Spanish market price.

For the Research Report of "Korea's most expensive", the Korean media YonhapNews confirmed the Zara ZaraRetailKorea Korea Companies, which declined to comment on AlphaWise.

However, the situation of Zara in the Korean market is going from bad to worse. Zara entered the Korean market in 2007. As of 2012, the sales growth in the market was only 20%. The subsequent growth rate of 2013 and 2014 was even lower than that of 11.5% and 4.6% respectively. In 2014, Zara Korea Companies was still in a state of deficit, with a loss of 8 billion won, or about 7 million US dollars.

In the Korean market, Zara was originally exported to H&M, Uniqlo UNIQLO, even Korean brand EightSeconds, SPAO and TopTen.

At present, Zara Retail Korea is jointly owned by Zara parent company InditexSA and Korea's local retail giant Lotte Shopping (023530:KS) Lotte shopping, each holding 80% and 20% respectively.

For Zara, prices are different in different regions.

Analyst Tang Xiaotang said this is a normal phenomenon, and the global price is abnormal. "Tariffs, excise taxes, local labor costs, logistics and even sales products all decide the price of a single product or the average selling price is different".

Tang Xiaotang also said that in the fashion category, the prices of some products in Asia, South America and other countries are generally higher than those in European countries, which are mainly subject to heavy taxes and exchange rate effects.

In the global retail market, especially the luxury market is extremely depressed, the mass consumer market represented by InditexSA (ITX.MC) is not only blocked, but to some extent, it has benefited, so InditexSA has not only slowed down the speed of opening stores, but has continued to expand vigorously.

According to the no fashion Chinese network data, as of the end of April, the first quarter of the year, InditexSA's 8 brands have 6746 entities in 88 countries and regions in the world.

During the first quarter, the group increased 63 new stores in 27 different markets, opening 10 more than the same period last year, 19 of which were ZaraHome brand stores, accounting for nearly 1/3 of new stores, and 15 new stores opened by Zara.

The group also renovated and expanded flagship stores such as New York (Fifth Avenue, 2), Tokyo, Copenhagen, Belfast and Tel Aviv.

In terms of electronic commerce, the group plans to enter this autumn.

Zara online stores in Macao and Taiwan extend their e-commerce layout to 30 regional markets.

InditexSA

MarcosL PEZ, chief executive, said that the first quarter results reflect very strong operating performance, and comparable sales in all regional markets have recorded positive growth.

After the two quarter, group growth increased slightly. From February 1st to June 7th, group net sales rose to 13.5% under the constant exchange rate.

In the 2014 fiscal year ended January 31, 2015, InditexSA achieved a net profit of 2 billion 500 million euros, slightly higher than the 2 billion 490 million euros expected by the market and 2 billion 380 million euros in the 2013 fiscal year.

EBITDA profit before interest tax depreciation and amortization increased 4.5% to 4 billion 100 million euros, but EBITDA profit margin fell 90 basis points to 22.6%.

Gross margin also contracted by 100 basis points, down from 59.3% in the previous year to 58.3%.

In the 2014 fiscal year, InditexSA net sales totaled 18 billion 120 million euros, an increase of 8.3% over the previous year's 16 billion 720 million euros.

The same store sales including physical facade and online sales increased by 5%, compared with 3% in the 2013 fiscal year.

Although online sales are still small, but the growth is strong, the flagship brand Zara.com's daily traffic has exceeded 2 million 500 thousand, more than doubled over three years ago. The website will increase online sales function in three markets in Greater China, such as Hongkong, Macao and Taiwan this year.