Inditex eyes online presense and about to close 1200 smaller stores

Inditex plans to close up to 1200 smaller stores globally as it invests more than €2.7 billion in expanding its online capacity and focusing on an integrated network of large-format stores.

Unveiling a strategic plan for the next two years, Inditex executive chairman Pablo Isla said the company expects online sales to account for 25 percent of total revenue by 2022, compared with just 14 percent last year.

Most of the stores set for closure are older shops carrying banners other than Zara. They collectively account for 5 to 6 percent of total sales.

Ultimately, Inditex will have a network of between 6700 and 6900 stores, down from the 7412 it operates today. About 450 new stores will be opened fitted with “all the latest sales integration technology” and effectively replacing the smaller-sized stores, which Isla says are less well-positioned to offer new-generation customer experiences.

“This strategy is a culmination of the project the company has been investing in steadily and significantly since 2012, a project that will transform its profile notably,” said Isla. “The overriding goal between now and 2022 is to speed up full implementation of our integrated-store concept, driven by the notion of being able to offer our customers uninterrupted service no matter where they find themselves, on any device and at any time of the day.”

The company believes that boosting online sales, underpinned by an integrated online-store network, with larger, higher-quality stores, will help generate 4 to 6 percent like-for-like sales growth annually.

Part of the plan will see a boost to Inditex’s Bershka, Pull&Bear and Stradivarius brands in China and Japan.

Inditex’s two-year strategy was revealed alongside the company’s first-quarter results announcement where it said it had limited the overall decline in sales to 44 percent in the wake of the Covid-19 crisis, despite 88 percent of its store network being shuttered at some point. Online sales surged 50 percent during the quarter and by 95 percent year on year in April.

Global sales totaled €3.3 billion in the three months to April 30, gross margin remained at 58.4 percent of sales and inventories reduced by 10 percent during the past year.

A net loss of €175 million was recorded and the company has made a provision of €308 million related to its restructuring plan.

Inditex closed the year with a cash position of €5.8 billion, compared to €6.7 billion a year earlier.