The Huge Number Of Stores Is Zara Redundant. The Electricity Market May Be A New Turning Point.

With the strength of the euro exchange rate, the number of large stores has become

The cumbersome.

Affected by exchange rate fluctuations and rising retail rentals, Spain

Brand Zara parent company

The profitability of the group is under attack.

According to the world clothing and shoe net, Inditex group's net profit rose by 6% to 2 billion 340 million euros over the nine months ended October. Compared with 9% in the same period last year, sales of the group's Inditex rose by nearly 10% to 17 billion 960 million euros, which is all up to Wall Street's forecast and gross margin further down to 57.4%.

The picture shows the main performance data of Inditex group.

Inditex group was founded by Spain's richest man Amancio Ortega in 1963. In addition to Zara, Inditex group's brand also includes Bershka, Massimo Dutti, Pull&Bear, Stradivarius, Zara, Inditex and X.

As of the end of the reporting period, Inditex group has 212 new stores in 52 global markets, with a total of 7504 stores.

Macquarie Group analyst Andreas Inderst pointed out that in October this year, most of Europe's warmer weather reduced consumer demand for Zara's autumn products, but as the weather gradually cooled, Zara sales growth has returned to normal levels.

However, investors are beginning to worry about the declining gross profit margin of the Inditex group.

Because more than half of the sales of Inditex group are generated in the form of non euro currency, the strong exchange rate of the euro has caused a certain blow to its profit.

According to the data, Inditex group's sales account for 8% in the Chinese market, 4% in the US market and 4% in the Russian market.

Because most sales are generated in non euro countries, Inditex has greater impact on the exchange rate than other retailers. Besides, the cost of the company in the euro area is also greater because the headquarters and logistics facilities of the company are located in Spain.

According to Inditex Group CEO Pablo Isla, the products of Zara 60% come from the supply chain of Spain, Portugal and Morocco, and the rise of the euro exchange rate means the increase of product cost.

Agence France-Presse analyst Anne Critchlow is also worried about the decline in profitability of Inditex group, indicating that the fluctuation of the euro exchange rate will further weaken the price advantage of Zara and other fast fashion brands in the market.

Societe General analyst Anne Critchlow stressed that the market has realized that the strong euro may continue to exert pressure on sales.

Another industry is expected that, by the same factors, Inditex's rival H&M group will also face difficult challenges, the same quarter, the same store sales or further decline in the third quarter.

Now, Inditex group, which is aware of the huge network of stores, sees the electricity market as a new turning point.

According to Bloomberg's latest news, Inditex has signed a leaseback agreement with 16 buyers of Spanish and Portuguese Portuguese shops. The total volume of pactions is expected to reach US $472 million. This news has aroused widespread concern in the industry and speculated that fast fashion is starting to face serious challenges of physical shop saturation.

Inditex group, analysts pointed out that the real threat to the traditional fast fashion is the decisive factor in business form.

Peel Hunt retail analyst Jonathan Stevenson said in the Financial Times report, "to imagine that Boohoo and other emerging e-commerce providers do this, you can't have a physical store."

The electricity supplier is "invisible" against "tangible". To become faster and lighter, we need to get rid of the efficiency loss caused by the large volume of the physical shop, because the electricity supplier does not need to guarantee the stock reserves of each store.

According to sources close to Inditex group, there are 14 stores in Spain and 2 in Portugal. The main purpose of the group is to invest more funds in expanding Zara's online business in Spain.

A senior executive in the Inditex group has confirmed the news and said that this is part of the group leasing homogenization strategy.

In terms of physical retailing, H&M Group CEO Karl-Johan Persson once said after the publication of the earnings report that it has realized the crisis brought by digitalization to fast fashion brands, and the global fashion retailing industry is undergoing a critical period of pformation. Especially, the brand management mode and retail channel are gradually tilting towards digitalization and youth. This makes the brand of the group face great challenges.

At present, Spain's electricity supplier is lagging behind the European average level, with a market share of only 3%, compared with 8% in Europe.

However, Andrew Allen, director of global real estate investment research at Aberdeen Standard Investments, believes that this also means that Spain will have more room for development. It is estimated that the electricity supplier share will reach 18% in 2021.

Inditex group said in its earnings report that at present, Zara has set up an electricity supplier channel in 45 regions of the world, and will continue to expand the scale of its brand e-commerce business in the future.

Zara's official website in India was formally launched in October 4th, becoming the first fast fashion brand to launch an e-commerce platform in India.

In the early fourth quarter of November 1st to December 11th, Zara entities and online sales had recorded an increase of 13%.

After the announcement, Inditex group's share price rose 3.53% to 31.87 euros per share, and its current market value is about 99 billion 600 million euros.

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