Reliance on Europe and smart, fashion-forward ranges hinder Inditex during COVID-19, says GlobalData

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Following today’s release of Inditex figures for FY2020/21; Chloe Collins, senior retail analyst at GlobalData, a leading data and analytics company, offers her view: “Dampened demand for apparel throughout the COVID-19 pandemic caused Inditex’s FY2020/21 sales to fall by almost €8m to €20.4m, as the group’s fashion-forward, dressy styles were rendered mostly redundant, and consumers prioritised spend with brands with larger loungewear and athleisure offerings. Inditex’s reliance on the European market, which made up over 60% of its sales before the virus hit, was also a major hindrance, with trading hours down 25.5% throughout the year as  countries such as the UK, Spain and Italy were heavily affected by COVID-19, resulting in several periods of store closures. However, the group’s digital platforms provided some respite, with online sales increasing by 77% to account for 32.4% of total sales, as the retailer launched websites in 25 new markets.

“Unsurprisingly, Massimo Dutti was Inditex’s weakest link, with sales contracting 37.0% due to its formalwear focus and its premium price points. Though demand should somewhat return in FY2021/22 as events resume and shoppers economic confidence improves, consumers are likely to still desire comfortable and versatile fashion items, and the shift to home working is expected to be long term, so Inditex should incorporate more casual options within the brand’s ranges. Core brand Zara (including Zara Home), which makes up c.70% of the group’s total sales and experienced a 27.8% decline in sales in FY2020/21, should focus its efforts on revamping its online images to accelerate digital performance even further, as some consumers could be deterred by the unnatural model poses on its website which make items difficult to browse.

“Though 15% of Inditex’s estate is still temporarily closed, appetite for its fashion has rebounded, with sales in the first week of March only 4% down on the year as consumers now have more clarity surrounding opening timelines and increased confidence thanks to the vaccine rollout. With all of its global sites expected to be open again by 12 April, Inditex’s stores (Zara in particular) will surely be among the top fashion destinations that shoppers will look forward to revisiting, and FY2021/22 should see the company fall back into its previous patterns of strong growth.”