Zara Parent Inditex Group Sales Increased By 3% In 2018.

Farewell to the golden age, Zara parent company Inditex Group sales growth slowed further to 3% in 2018.

As rents are rising and dragged down by huge physical stores, the performance of Zara, a fast fashion giant in Spain, continues to deteriorate.

According to the world clothing and shoe net, in the 2018 fiscal year ended January 31st, the sales volume of Zara parent Inditex (ITX.BME) group increased by 3% to 26 billion 100 million euros, an increase of 4% compared to sales, a further slowdown in sales growth of 9% over the 2017 fiscal year, 56.7% of gross profit margin, and 12%% to 3 billion 400 million euros of net profit.

During the reporting period, the electricity supplier channel has become the most important driving force for group performance. Sales growth from this channel is 27%, accounting for 12% of total revenue, or 3 billion 200 million euros, but far less than the strong growth of 41% in fiscal 2017.

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.

By brand:

The core brand Zara, including household products, grew by 3.2% to 18 billion 20 million euros last year.

Pull & Bear sales rose 6.6% to 1 billion 862 million euros;

Massimo Dutti sales grew 2% to 1 billion 802 million euros;

Bershka sales rose by 0.58% to 2 billion 240 million euros.

Stradivarius sales increased by 3.6% to 1 billion 534 million euros;

Oysho sales recorded an increase of 2.6% to 585 million euros.

Uterque sales rose 10.3% to 101 million euros, mainly due to the expansion of the brand under the China online.

By Region:

Inditex group's largest market is still in Europe. 45% of its revenue comes from Europe outside Spain, 16% from Spain, 23% from Asia and emerging markets, and 16% from the United States.

As of the end of the reporting period, Inditex group has 7490 stores worldwide, adding 370 stores in the past year, refurbishing or expanding 226 stores, and launching official website and e-commerce services in 106 countries and regions. The group's expenditure on rent is increased by 1.4% to 2 billion 392 million euros compared with 2 billion 358 million in the 2017 fiscal year.

Pablo Isla, chief executive of Inditex group, said in its earnings report that the group's performance in the past year has not been off track. Apart from opening new retail stores and launching smart APP, its brand is also trying every kind of daring innovative initiatives. The group is constantly digitization and "making itself faster" through continuous introspection.

After Pull and Bear launched a series of cooperation with Spanish singer Rosalia, the group's underwear brand Oysho also launched a ski suit with a Recco detector.

At the end of December last year, Zara suddenly announced that it would launch the first lipstick series to formally enter the field of make-up, and announced that it would vigorously develop the perfume market.

Zara's first make-up series was led by Pat McGrath, a British makeup artist who co founded with luxury brands such as Dior, Armani and other luxury brands.

In the Chinese market, Zara, who never invited spokesmen, appointed post - 90s star Dongyu Zhou and Wu Lei as ambassadors for the big China brand in September and sold the same money in the Tmall flagship store.

The main high-end and niche Uterque settled in Tmall last August and opened the first store in mainland China in Shanghai.

According to Pablo Isla, over the past 5 years, the group's total investment in online channels has exceeded 7 billion 700 million euros, of which 1 billion 500 million euros has been designated for upgrading technology and logistics.

In the new headquarters that was put into use early last year, the group put together Zara, Zara Home's design, products, technology and sustainable development team to further enhance operational efficiency.

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In addition, the Inditex group has upgraded the various distribution centers and set up innovative departments. Apart from the introduction of machines that can quickly classify cosmetics, there are 6 new robot distributors.

The future group will also build a distribution center in Holland, and share some pressure for 10 distribution centers in Spain.

By adjusting its own operation mode and centrally managing the product distribution of various brands by central inventory, Inditex group will increase the number of new products to all stores in the world to two times a week, and the online official website will be synchronized on the same day or the next day.

However, Morgan Stanley analyst Geoff Ruddell believes that the further slowdown of the Inditex group's performance last year means that the above restructuring initiatives have not produced much effect, while the slowdown in online retail growth shows that the group's online market competitiveness is not as good as its pre maturity.

Other analysts believe that although the Inditex group's fast response business model makes it more competitive than its competitors in the face of consumer demand or market changes, its sales in the increasingly rapidly growing fashion industry are still being hit by other fast fashion and promotional efforts during the Christmas season.

It is reported that Sweden's fast fashion H&M sweater price fell to $9.99 during the Christmas season, which made it impossible for Inditex group to achieve a target of 4% to 6% sales growth in the second half of Pablo Isla.

In this regard, Pablo Isla explained that the decision to stick to the price is based on the confidence of the new product line to be listed on the brand of the group.

Bloomberg research and analysis pointed out earlier that Inditex group's success is mainly due to the flat management structure and the importance of big data.

Compared with other fashion brands, the advantage of Zara lies in its emphasis on products and supply chain, and the corporate culture is not so easily copied as the latest fashion trend. This is also the key to Inditex's continuous success.

However, the changes in the fashion retail market are becoming more and more rapid with the rapid development of Internet and technology. The efficiency of various links has contributed to the shopping frequency of consumers. In the face of the rapid rise of Boohoo and Missguided, and the constant launching of competitors such as UNIQLO, it is only now realized that Inditex group, which is important in marketing, may have missed the best turning point.

Coye Nokes, partner of OC&C Strategy Consultants, a management consultancy, said Zara was behind in the digitalization of apparel industry, while online sales accounted for only 12%, while its competitors' online sales accounted for between 20% and 30%.

In addition, Zara's initiatives to enter the beauty market are not favored by the capital market. Some analysts say that today's consumers have too many choices, while Zara is almost distributed in a second tier city. The acceptance of high-end cosmetics is very high in these markets.

Without the stimulus of star goods effect, the survival of parity and beauty will be more and more difficult. Unless the cooperation with stars, Internet users or bloggers who can bring more value added, Zara's brand power can hardly arouse consumers' interest.

What it means is that at the end of January this year, Zara suddenly changed the brand new Logo when it released the 2019 spring summer series, which is the second time since the establishment of the brand Logo.

Although Zara preserves the original Serif serif fonts, the letters become more slender and compact.

In this regard, the evaluation of consumers in social media is mixed. Some consumers think this change is meaningless. Some netizens believe that Zara is a signal that the brand will pform to a more high-end market.

In less than a month, Massimo Dutti also launched a new Logo on its APP, pforming the classic Shield logo to a smaller circle around interlocking "M" and "D".

The letter "M" is rendered in sans serif typeface, while "D" retains its classic appearance.

Up to now, the official spokesperson of Zara and Massimo Dutti has not responded to the new Logo, and the group has not mentioned relevant information in the earnings report.

Columnist Liang Yi said earlier that trademarks are the first impression of brand identity and consumer recognition.

For Logo, the change is not only about trademark, but also about the design direction, style, image, audience and so on. Therefore, it is considered that the major brands of Inditex group have changed Logo in succession, and it is also anxious for the development to fall into a bottleneck.

What needs to be vigilant is that the H&M group has also shifted the focus of the next development to the online industry. At the same time, it is also optimizing and adjusting its brand matrix. In the past year, Nordic brand ARKET and discount platform Afound have been newly added, and are determined to close down the cowboy brand Cheap Monday.

In the fiscal year ending November 30th last year, H&M Group sales rose 5% to SEK 210 billion 400 million, gross margin 52.7% and post tax profit of SEK 12 billion 652 million.

Pablo Isla stressed at the earlier shareholders' meeting that making products more accurately and reducing waste will become a way to promote the sustainable development of Inditex group.

For the 2019 fiscal year, Inditex Group expects sales growth to return to 4%-6%. It will continue to increase investment in the online market and introduce more advanced logistics systems to cope with increasingly fierce market competition.

After the release of the earnings report, Inditex group's share price fell 5.33% to 24.88 euros on Wednesday, and its current market value is about 77 billion 500 million euros, which has evaporated 30% compared to the peak of 2016 stock price.