Zara owner Inditex slashes China stores in digital focus

By Thomson Reuters Mar 14, 2024 | 9:47 AM

By Corina Pons and Helen Reid

MADRID (Reuters) – Zara-owner Inditex more than doubled its pre-tax profits in China last year even as the fashion retailer scaled back its physical presence, closing a fifth of its stores in the country in a sign its focus on online sales is bearing fruit.

Inditex has been shrinking its store footprint globally over the past few years, seeking to optimise its selling space by focusing on flagship outlets in prime locations and ramping up online sales.

Of 123 net store closures globally last year, 50 were in China, Inditex’s annual report showed on Thursday. As recently as 2019 Inditex had 570 stores in China, its biggest physical footprint after Spain. The retailer now has 192, as of Jan. 31 this year.

“Inditex for several years has adopted a more digital first strategy in China given the structural trends in the market there and the huge importance of e-commerce”, said RBC analyst Richard Chamberlain.

Inditex’s profit before tax in China more than doubled to 241 million euros ($263 million) for the 2023 financial year ended Jan. 31.

Inditex launched a weekly livestream experience on video-sharing platform Douyin in China late last year as a way to boost online sales, and plans to launch livestreams for its core brand Zara in the United States and Britain this year.

“We view this initiative positively… given the widespread integration of digital platforms into people’s everyday lives, we believe that leveraging platforms like Douyin can effectively engage Chinese consumers,” said Firdaus Ibrahim, equity analyst at CFRA Research.

Overall Inditex increased its online sales by 16% to 9.1 billion euros in 2023, accounting for a quarter of total sales. Inditex has 5,692 stores globally, over a third of which are its core brand Zara.

The China results contrast with Inditex’s performance in the United States, its second-biggest market by sales, where pre-tax profits fell 7% last year, according to the annual report.

($1 = 0.9171 euros)

(Reporting by Corina Pons in Madrid and Helen Reid in London; Editing by Emelia Sithole-Matarise)