Zara India reports drop in profit

Fashion retailer Zara India has reported a 13.4-per-cent drop in net profit over the last financial year, reflecting increased competition and a drop in demand during the period.

The loss came despite a 17.7 percent increase in sales over the year to  ₹1438 crore (US$208 million), which suggests the company has been heavily discounting to maintain stock turnover.

Two years ago, Zara India saw a 40-per-cent drop in profits after ruthlessly slashing prices to beat competitors.

The brand opened two new stores in the territory and expanded its presence to a total of 10 Indian cities during the last financial year.

“The numbers could reflect a dip in same-store sales growth,” noted an Indian retail industry commentator. “Also during the year, India saw no major new net mall additions in large cities for a brand such as Zara to open add more stores”.

A spokesperson for Zara’s local partner Trent maintained that the primary challenge to the brand’s faster expansion is the availability of high-quality retail spaces that could be expected to generate reasonable sales throughput.