Inditex loves Britain, and Britain loves Inditex: a retail story

While data is still coming in about how the UK retail industry has mostly been unable to weather consumers’ pessimism and domestic budget tightening in August, Inditex brings some positive news from its British division.

We have just read this in Expansion:

“Inditex and Mango managed to overcome the British retail market’s weak condition by increasing distribution in 2010 sales over their competitors, according to the annual accounts of the British subsidiaries of the two Spanish textile distribution companies.

In the UK, Inditex brands reached a combined turnover of £387.24mn (€445mn) in the year that ended in January 2011, an increase of 8.3%. Mango, meanwhile, increased its revenues in Britain by 15.3% in 2010, up to £35.36mn.”

The whole of the British clothing and footwear market for which, together with the Spanish groups, Marks & Spencer, H & M, Gap and Uniqlo compete, grew 4% in 2010, according to the Office for National Statistics.

“Within Inditex group, the main engine of British sales was the Zara chain. With 64 stores, it increased its sales by 7% to £332.5mn. According to Zara UK’s annual report, ‘the company achieved good sales growth, confirming the belief of the management team that the brand positioning by offering good value adapts well to the expectations of consumers.'”

As Zara has inagurated no new establishments in Britain during the past year, the conclusion is that the increase in business has been due to activity growth at its existing stores. None of the rest of the brands of the Galician group Inditex (Massimo Dutti, Berskha, Zara Home, Pull & Bear) opened any new premises in 2010, either.

Expansion says that

“The last major openings on part of Inditex occurred in 2009 when Pull & Bear and Massimo Dutti opened on Oxford Street, one of the most famous commercial streets of London. It is their contribution that partially explains the boost in sales of these two brands. Since then, Inditex has decided to focus on cost cutting to cope with the economic crisis in the UK.

The British household heavy indebtedness and rising unemployment in the country has caused experts to forecast several years of modest business developement. Thanks to this containment strategy, Inditex subsidiaries recovered part of the profit lost during the recession that Britain suffered during the second half of 2008 and 2009. Zara UK obtained a net profit of £10.2mn in 2010, after 2009 modest gains of 0.23mn and a loss of £18mn pounds in 2008.”

Now, what’s in store for London 2012? The next step in the expansion of Inditex will be the opening of Zara, Bershka and Pull & Bear branches in the big shopping centre that will be this September ready near the stadium that will host the 2012 London Olympics to welcome customers from everywhere in the planet .

“Mango MNG-UK, meanwhile, couldn’t quite return to profit levels in 2010, but it recorded a mere loss of £0.6mn, down from 2009 £3.25mn in the red. The Catalan chain has maintained its growth process in the UK in recent years by opening new stores and concessions in the House of Fraser department stores.”

Another Spanish textile distribution group, Cortefiel, has just entered the UK with their brands Springfield and Women’secret, but we’re not going to call this the retail Armada (but some might).

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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