Inditex’s Strategy for Growth: Efficiency, Profitability, and Responsible Expansion

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Inditex’s Strategy for Growth: Inditex is boundless in its ambition. A 30% increase in net profit to 5.381 billion euros was one of the record-breaking financial achievements reported once again by the Arteixo-based corporation. Inditex intends to expand even more, despite the clear satisfaction within the group, as stated by its CEO, Óscar García Maceiras. During the press conference that revealed the fiscal data for 2023, the senior executive of the firm spoke at length on the “growth opportunities” that are ahead, which Inditex is obviously going to take advantage of.

 

There have been many notable achievements in 2023. According to the CEO, who took over in 2021 after the legendary Pablo Isla, the company has been successful in capitalizing on opportunities across all of its commercial formats, in diverse markets, and in both physical and online stores. This success can be attributed to the hard work and devotion of all of its professionals.

The CEO noted that the previous fiscal year was characterized by expansion. “This is proven by the excellent trajectory of our sales, which reached 35.947 billion euros, an increase of 10.4 percent from 2022,” he said, highlighting the outstanding success in every region and commercial format, which saw sales growth in the double digits. Zara continues to be the most profitable and prominent brand inside the group. Sales for the year 2023 were 26.050 billion euros, a rise of 10% from the previous year. But with a 19% increase to 744 million euros, Oysho had the greatest growth.

A “satisfactory growth” of 16% from the previous year was reflected in the online channel’s 9.064 billion euros in turnover. “Undoubtedly, this surge has been greatly facilitated by over 251 million social media followers and over 6.5 billion platform visits throughout the year, averaging 18 million visits daily,” pointed out García Maceiras. Despite the group’s best efforts, the digital channel is currently only contributing 25.2% of total revenue, much below the 30% global target.

Doing “whatever is necessary”

 

“Our expansion is incredibly encouraging, productive, lucrative, and conscientious. García Maceiras emphasized the company’s “rigorous control” over operating expenses, which remained at 10% in 2023, below the sales growth rate, and stated that they have maintained their discipline in cost management on several occasions. At the same time, the amount of cash on hand increased by 13%, reaching 11.406 billion euros. “It’s this robust financial position that will enable us to continue investing whatever is necessary for the group’s future growth, in addition to upholding our commitments and ensuring an attractive return for our shareholders,” explained the CEO.

The CEO also highlighted the company’s tax contribution, which he said will reach 8.680 billion euros in 2023 at an effective tax rate of 21.5%. Among the many countries where Amancio Ortega’s conglomerate paid taxes, Spain raked in over 2.230 billion euros, or almost 25% of the total.

García Maceiras just confirmed that the company shares this information with its stakeholders, which allows for traceability of its supply chain, when asked by media if Inditex will follow other competing corporations in disclosing its list of suppliers. Inditex has “a close relationship with over 6,600 Spanish suppliers,” according to the CEO, who said they invoiced the company nearly 6.9 billion euros last fiscal year, and this is only in the local market.

A focus on “quality” workers and the “headquarters effect”

 

“We uphold our commitment and aim to be providers of quality employment in each market where we operate.” The number of employees in the domestic market increased by 1,600 to 47,761 in 2023. Good jobs are still available from us. Indefinite contracts and chances for professional development are available to 87% of our staff.

The combination of modesty, caution, and ambition is in our DNA, and it is this combination, combined with an underlying dissatisfaction, that has brought us together as a team and brought about these remarkable outcomes, he said, describing the team’s defining characteristics. Without a question, this sense of self will serve as a compass as we move forward, ensuring that we continue down this road of progress.

With a 24% increase from the previous year—and a 20% increase from the previous fiscal year—Inditex paid 2.351 billion euros in taxes in its native nation during the last fiscal year. At the same time, Spain’s payment exceeds 9.4 billion euros, making up 25% of the total paid globally and economically adding to the “headquarters effect” mentioned by García Maceiras.

The present fiscal year’s outlook

 

The year 2024 is off to a great start, even if we’re still dealing with a very complicated climate. The executive concluded that inflationary pressures and geopolitical instability were present with moderate growth rates in the majority of markets. So, sales increased by 11% from January 1st to March 11th (after accounting for the leap year) as compared to the same time last year.

“This favorable evolution propels us to continue promoting initiatives that enable us to seize all the opportunities that come our way and that are aimed at enhancing and developing the four engines of our business model: a unique fashion proposition, an increasingly enhanced customer experience, a firm and defined commitment to sustainability and talent, and the commitment of all our personnel,” he said.

Inditex is set to reopen 50 stores in Ukraine starting April 1st, after a two-year absence from the country and Russia (which was once the conglomerate’s second-largest market behind Spain).

Commercial network optimization and exploration of new markets

 

The CEO had announced his intention to keep looking into new markets. Uzbekistan and Cambodia were among the 41 nations where Inditex launched shops in 2023. There were 5,692 stores run by the company at the end of the year, down 123 from the previous year. This represents a decrease of 2%. Of these, 4,589 were owned by the group, while the remaining stores were franchised. However, there was a 2% growth in the company’s net commercial space.

There were 1,157 brick-and-mortar stores in Spain as of the end of the fiscal year, down 68 from the previous year. This number is the lowest it has been in the past 20 years. “We’ve been implementing a program of enhancements and optimization of our commercial network for some time now,” he said. “Our efforts involve finding retail spaces that enable us to provide our clients with a comprehensive range of products, showcasing distinct areas,” he stated, using the recent restructuring of Zara’s space in Seville’s Plaza del Duque as an example.

After seeing “positive results of its online activity through its website and Zara.com,” Massimo Dutti will launch a Miami store this year, while Oysho will make its debut in Germany with a boutique in Hamburg. Zara Home and Bershka, meanwhile, will launch in the Indian market. At the same time, Zara Pre-owned, the company’s platform for managing pre-owned Zara clothes, will be launched in the United States.


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Ethan Sullivan

Ethan's penchant for the pulse of the fashion world extends to covering lifestyle topics, offering readers a seamless blend of the latest style updates and lifestyle trends.

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