Zara Parent Company'S First Quarter Earnings Rebound Warmer Bet Digital Improvement

In the face of widespread difficulties in fast fashion, how to break the deadlock has become the biggest challenge of all giants. Spain's fast fashion Zara parent company Inditex is improving its decline through betting digitalization.

According to the fashion business news, in the three months ended April 30th, Inditex's first quarter sales increased by 5% to 5 billion 930 million euros, an improvement of 2% over the same period last year, but still far below the 14% growth in the 2017 fiscal year.

During the period, the gross profit margin of the group was 59.5%, and net profit rose 10% to 734 million euros.

Inditex chairman and CEO Pablo Isla emphasized in the earnings report that the growth of performance was mainly due to the promotion of digital business expansion. During the reporting period, the group's Massimo Dutti, PU & B, Zara Home and Oysho brands were launched in Morocco, Egypt, Lebanon, Israel, Serbia and Arabia.

In addition, Zara also plans to launch online businesses in South Africa, Qatar, Kuwait, Bahrain, Oman, Jordan, Columbia, Philippines and Ukraine.

Despite its late entry into the electricity business, Inditex has begun to focus on developing online businesses in recent years.

In November 2018, Zara's global business website opened up 106 new markets. At present, Zara has an online platform in 202 markets worldwide.

According to Pablo Isla, the group's official website visited 500 million times to 2 billion 900 million times last year, and recorded a record of 9500 euros per minute.

Pablo Isla has said that it will open its brand e-commerce website in all the markets around the world by 2020, optimize the online platform platform, increase the online store product return and other services, and the group's store strategy in 2019 will be dominated by online, or poor entity stores or closed.

It is worth noting that, in response to the question of the slow speed of the Zara business in comparison with other brands, Pablo Isla appeared to respond to the activities organized by the Wall Street journal in May. He pointed out that Zara did not enter the electricity supplier field until 2010, and its positioning and direction were more clear. Although its brand entered the electricity supplier field later, it led the group to take a lot of detours. "If all this happens 10 years ago, it will be very different."

At present, Zara is also trying to deliver door-to-door services in China, and will expand to other markets in the future.

To better promote the pformation of the group to digitalization, a week after responding to Pablo Isla, Inditex suddenly announced that the 48 year old chief operating officer Carlos Vrespo became the new CEO, and Pablo Isla continued to serve as chairman of the board. The decision will be voted on at the shareholders' meeting in July.

Crespo Vrespo will mainly be responsible for supervision, management, IT, logistics and sustainable development.

Pablo Isla admits that Zara and other brands are being threatened by changing consumer habits and online retailers such as Amazon, while Carlos Vrespo is a key figure in the group digital strategy and has a wealth of relevant experience. The appointment will help its brand to achieve faster next year's goal of providing e-commerce services in all regions of the world.

In addition, Zara Home, as a household brand of Zara, has gradually become the focus of Inditex development.

Inditex said in its earnings report that Zara Home will provide consumers with customized services such as home furnishing, soft clothing design, and provide additional services such as logistics and distribution, combined with digital channel layout.

In March of this year, Zara Home online business was merged into the Zara apparel official website, and thereafter will gradually merge with Zara, which will become the fourth category of Zara business in the future.

Pablo Isla said the move was aimed at enhancing synergy among brands.

Inditex points out that the development goal of the group is to leverage the leverage of entity stores and online platforms in operation and brand management.

At the same time, Zara also pays great attention to opening up online and offline stores.

In February 2018, Zara developed an intelligent operation system, which provides acoustic technology to track passenger flow and provide virtual assistants for consumers. By 2019, 8 brands of Inditex group will open up online and offline stores.

In addition to the promotion of the electricity business to group performance, Inditex executives said in a conference call that strict control of inventory, full price sales and sustainable mode of production were also the reasons for the improvement in performance.

As early as last year's shareholders' meeting, Pablo Isla made it clear that making products more accurately and reducing waste has become a way to promote the sustainable development of Inditex group.

Inditex has installed second-hand clothing recycling bins in 1440 stores in 25 markets around the world.

Adam Cochrane, a Citigroup research analyst, pointed out in a recent report that changes in management of the Inditex group reflect the importance of digitalization and sustainability to the fast fashion business model. With the rising cost of rent and the rapid development of digital channels, sustainability has become the next wave that fast fashion retailers need to deal with.

However, Inditex business is also facing fierce competition.

H&M, a fast fashion giant, has also begun to force the online market in recent years. Its brand &Other Stories announced this week that it will enter Tmall in the second half of this year.

According to analysis, as the rental costs of offline stores rose, H&M group finally realized the importance of the electricity supplier, and expressed great expectations. Last year, the group's online revenue recorded a strong growth of 22%, accounting for 14.5% of the total sales of the group.

According to the latest list of online marketing solutions company SEMrush, H&M beat Zara to become the world's largest consumer search website.

At the same time, Inditex is also facing a threat in its main market. China's e-commerce and O2O (online to offline) may weaken the traditional advantage of the fast fashion giant.

From the Tmall double 11 data in recent years, we can see that Zara has no advantage on the online market, and is left behind by its competitors and some domestic apparel brands.

After the release of the earnings report, Inditex group's share price fell by 1.03%25.02 euros yesterday, with a market capitalization of about 78 billion euros.