Inditex, Zara’s parent, plans to close 1,200 stores after losing $1.5 billion in the first half

In recent years, the situation in the apparel industry has been deteriorating. With the coVID-19 epidemic, these apparel companies, including some big international brands, such as Inditex, the parent company of fast-fashion giant Zara.

Inditex, the parent company of global fashion giant Zara, reported a net loss of 195 million euros (1.5 billion yuan) in the first half of this year.

Inditex, meanwhile, joined the wave of store closures, revealing in its first-quarter results that it planned to close 1, 000-1, 200 stores.

Inditex shares have lost nearly 27 percent of their value so far this year, wiping out nearly 27 billion euros (214 billion yuan) in market value due to poor results and the impact of the outbreak. The group’s founder, who topped the Forbes list in 2015, has also seen his wealth plummet and is now ranked 10th.

The impact of the epidemic resulted in a net loss of 1.5 billion yuan in half a year

Inditex posted a net loss of 195 million euros (1.5 billion yuan) in the first half of the year, compared with a net profit of 1.55 billion euros in the same period last year, according to its semi-annual report.

In terms of sales, Inditex’s net sales fell to 8.03 billion euros from 12.82 billion euros in the first half, a third lower than a year earlier.

Despite the poor results, Inditex said it had reached a “turning point”, with the first half of the year’s loss mainly coming from the first quarter, when it lost 409m euros, compared with a net profit of 734m euros a year earlier, due to the impact of the outbreak. Net profit for the second quarter (May 1 solstice, July 31) hit €214m, beating analysts’ expectations of €96m. Meanwhile, by mid-September, 98 per cent of Inditex’s stores had reopened and online sales had surged.

Inditex owns ZARA, PULL&BEAR, Bershka, Stradivarius, Massimo Dutti, Oysho, Uterque, ZARA HOME and other apparel brands. Prior to the outbreak of the epidemic, Inditex owned nearly 7,500 stores.

During the reporting period, sales of core brands Zara and Zara Home plunged 37.8% to 5.532 billion euros, Pull&Bear fell 33.79% to 578 million euros, Massimo Dutti almost halved to 490 million euros, Bershka fell 35.9% to 692 million euros, Stradivarius fell 35.3% to 502 million euros, and household clothing brand Oysho was the least hit, recording a 30.8% decline to 209 million euros. A decrease of 40.3% to 31 million euros.

It plans to close 1,200 stores

Inditex revealed in its first-quarter results that it plans to close 1,000 to 1,200 stores worldwide in 2020 and 2021, with the closures mainly in Asia and Europe. The planned closures will affect mainly smaller stores across its Zara, Massimo Dutti and Pull &Bear brands, the company said.

However, Inditex plans to maintain a global total of 6,700 to 6,900 larger, higher-quality stores, including 450 new stores equipped with the most advanced integration technology, according to chutian Metropolis Daily, the head of Inditex’s China public relations department. “For example, we will open the new ZARA Beijing Wangfujing flagship store in China, which is not only the largest ZARA store in Asia, but also the most technologically advanced store in the world.” Most of the small shops that will be closed are relatively old, the official said.

“At the same time, we will be taking in 1,000 to 1,200 smaller stores that account for 5 to 6 per cent of total sales and are not in a good enough location to offer customers a new shopping experience.”