Zara owner Inditex's global expansion accelerating as profit rise

Pablo Isla, CEO of Inditex, the owner of clothing retailer Zara, has reportedly stated that he optimistic about the group’s prospects for its 514 stores in China where it makes 7% of its sales, despite the slowing economy. This comes after Armancio Ortega, the group’s founder, reported an overall sales increase of 16% to €14.7bn (£10.6bn) in the first three quarters of this year, with profits up 20% to €2.02bn. Although growth in China is predicted to fall to 6% in 2016, over the next five years, per capita income is forecast to rise from an average of $7k (£4.6k) to $12k. Inditex has added 13,079 jobs and 230 new shops worldwide taking the total people employed by the group to 146,478 globally, which represents a significant acceleration in their international expansion plans. As part of the Inditex brand portfolio, Zara had the most new openings with 60 stores and the planned extension of its online operation is set to cover all of Taiwan and Hong Kong, in addition to the European Union. The main mid-market rivals for Inditex in China are H&M and Japanese company Fast Retailing, parent company of Uniqlo.

Inditex, the owner of clothing retailer Zara, has said it is optimistic about its prospects in China despite the slowing economy, claiming mid-market brands were not feeling the pinch.

It came as the group, whose founder, Armancio Ortega, briefly overtook Bill Gates as the world’s wealthiest man this year, reported an overall sales rise of 16% to €14.7bn (£10.6bn) in the first three quarters of this year, with profits up 20% to €2.02bn.

While luxury western brands such as Burberry have struggled in the Chinese downturn, bosses at the Spanish retail group, which also has Massimo Dutti, Bershka and Oysho in its portfolio, remain upbeat.

“We have no doubt that the fashion appetite in China is large, our brands are better and better known. We are still feeling very optimistic,” said Pablo Isla, the chief executive.

Inditex has 514 stores in China, where it makes about 7% of its sales. Although growth in the country is predicted to fall to 6% in 2016, per capita income is forecast to rise from an average of $7,000 (£4,600) to $12,000 over the next five years.

The company has opened 230 new shops around the world in 2015, the same as last year, bringing the total to 6,913 in 88 countries. Spain has the most, with 1,824 shops, followed by China and Russia.

Zara had the most new openings with 60 stores. There were also 44 new Zara Home outlets and 26 new branches for the underwear chain Oysho – significantly accelerating their expansion.

At the same time Zara’s online operation is being extended to cover all of the European Union, Taiwan and Hong Kong, while zarahome.com has launched in Australia.

The company said it added 13,079 new jobs in the past 12 months, of which 3,291 were in Spain – which is still struggling with mass unemployment with more than one in five out of work.

Inditex employs 146,478 people globally and any employee with two or more years’ service receives a bonus based on 10% of the annual increase in profits.

The group’s main mid-market rivals in China are H&M and the Japanese company Fast Retailing, parent company of Uniqlo, which opened its first store in Shanghai in 2002 – four years before Inditex opened in the same city – and now has more than 400 outlets across the country.

The Japanese company plans to park its tanks on Inditex’s lawn when it opens its first store in Spain next year. It has already optioned a property on Barcelona’s main shopping thoroughfare Passeig de Gràcia but is said to be having second thoughts due to the unstable political situation in Catalonia and may opt to open in Madrid’s Gran Via instead.

Inditex emphasised the large charitable donations it has made towards helping refugees in Europe as well as organisations such as Médecins sans Frontières, Every Mother Counts and Water.org. The group’s charitable foundation has funded a number of nursery schools and health centres in Galicia, home to its founder.