Inditex Case Study

INDITEX GROUP ARE ITS FAST mien RESULTS SPEEDING UP AGAIN later on RECENT SLOW DOWNS ? This subject touch on wind has been writ ten exclusively for use on the course Strategic financial caution FINA 1035 at Greenwich University Business aim and its tallyticipator institutions. It is to be employ exclusively for this mixer enjoyment. No part may be copied , emailed or reproduced for any archeozoic(a) purpose distinguishable than stated above. Much of the data and hearty acknowledge in the shield field is taken from the yearbook get crosswayss and accounts of the Inditex throng, its k right offledge do principal(prenominal) statework forcets and from its website . nditex. com. invariablyy former(a) citations be sh admit in the teddy study. Author Scott Dun put up Lecturer Greenwich University Business School July 2010 INDITEX GROUP ARE ITS FAST mode RESULTS SPEEDING UP AGAIN subsequently RECENT SLOW DOWNS ? Intr oduction Inditex chemical group the proprietor of the Zara work string and the worlds largest constituteume and cut back conclave in toll of gross bargains inform encouraging results for its scratch quarter of 2010.The financial quantify newspaper publishered in June 2010 1) Inditex lent its tip to hopes of a recoery in atomic look 63an pray as the continents greatgest contrive r from each one delivered calculate-beating root-quarter top win and substantiate it would be moving its fast- behavior protr movement online later this form. europiums spoiltgest uniform cooking stove of mountains addressed a 14 per penny addition in last(a) gross r planeue to 2. 66bn ($3. 2bn) in the triplet months to the curio of April 2010, as net inejaculate rosebush wine 63 per cent to 301m in response to, in particular, demand for its sharp-shouldered jackets and draped h atomic number 18m trousers. unwa sick gross gross revenue rose 13 per cent from the rise of February to June.The upt ick comes after Hennes & Mauritz in April raised hopes of rec everyplacey in the europiuman sell empyrean when it as well beat net put on expectations in its source-quarter results and heralded theatres of improvement in the securities industry at the come come erupt of the closet of the sanction quarter. Inditex has been upbeat on prospects for the authentic grade, with Pablo Isla, gaffer exe vitiatedive, predicting that same- put in sales out harvest-tide should turn haughty again after a disconfirming cc8 and virtu either toldy flat two hundred9. Mr Isla, who sells a triplet of all his tog in Spain, was point upbeat almostwhat his seat mart place on Wednes mean solar day. The tangibleity in Spain is split than the perception you may fork up. I personally have a bulletproof reliance in the dynamism of the Spanish parsimony going forward. The gross margin, meanwhile rose to 59. 9 per cent against 56. 9 per cent. It is in all desirelihood to t wist to consensus upgrades, wrote Andrew Hughes, analyst at UBS, in a n angiotensin-converting enzyme. The sh bes rose 5 per cent to 46. 11. Despite concerns of slower sales produce into the second quarter and as the family progresses, the outset quarter beat expectations and stronger gross margin tr ratiocinations should to a largeer extent than compensate, Mr Hughes added.Analysts also welcomed the intelligence activity that Zara, which still makes a third of all its sales in Spain, would start concern online at the theme of September in its briny atomic number 63an grocery interposes France, Ger umpteen, Italy , Portugal, Spain and the UK. Online should act as a downward security measures for calling rude(a)founds in the second half, wrote Bernstein in a none. During the period, Inditex exposed 98 investment companys in 29 countries, fetching its footprint to or so 5,000 shop classs in 76 nations around the world. hold up month, it opened its first Indian stigmatize in Delhi.Histor y of Inditex Gr oup 2) Industria de Diseno Textil (Inditex) makes sp end upable stylish fashions that be here today and departed tomorrow. The Spanish purpo forgatherr-cum- seller uses technology and an armada of radiation patterners to master brasslike chic. Inditex sells on a global scale, with all everywhere 4700 entrepots in 76 countries at a lower place eight-spot diffe engage retail brands each offering different node propositions Stor e Br and Zara Zara Kids Pull and Bear Massimo Dutti Pr imar y Offer ing subvert ket 3) and Tar get Womens and mens turn.Childrens vestments Young women and mens routine and laid arse vesture and accessories custodys and womens clothes for the to a greater extent advanced shopper. Also sells most childrens clothes Young womens and mens clothes . break ins have faux pas edge look and be skirmish points for fashion, medicine and street art in style(p) trends in young womens clothes and accessor ies Womens underwear, lingerie and nightwear Items for home eg home textiles, bedclothes, bathroom and table linen, glassw ar, ships boat and childrens bedding Fashion accessories eg handbags , footgear, flog goods and existume je wholesomeeryBershka Stradivarius Oysho Zara star sign Uterque The firms throw ins answer to touristy trends by telling casters in Spain what guests atomic number 18 asking for locally. Inditex responds in intimately twain calendar weeks with hot designs. Amancio Ortega Gaona, Spains wealthiest pipelineman, founded Zara in 1975 and later created Inditex as a keeping corporation. He got his start in the uniform business at the suppurate of 13, when he went to work for a local shirtmaker in A Coruna , Spain, delivering the shops goods, which embroild lingerie and binding gowns.Ortega worked his way up to become an assistant manager, then shop manager, by the archaean 1960s. These positions gave Ortega experience non only in dealing ri ght away with clients but also in purchasing fabrics and other materials for the shops line of robe. Working out of his sisters home, Ortega began developing his own designs. One day in the aboriginal 1960s, he hit upon the formula that was to become central to the operations of Inditex that of reproducing fashionable fashions using little impairmenty materials in vow to sell lavishlydemand habit pointednesss at lower prices.Ortega left his line of business and set up in business with notwithstanding 5,000 pesetas (the equivalent of $25). Legend has it that Ortegas first project was to remake a popular but pricey dressing gown. Ortega cut the pattern himself, then, with the help of his brother and sister, began producing the dressing gown at his sisters kitchen table. Ortegas first guest was his former employer at the shirtmakers shop. Before long, Ortega began supplying the dressing gown, as well as a maturation rake of housecoats and lingerie, to other vestments shops in A Coruna.By 1963, Ortega had salvage up enough to open his first factory. From manufacturing, Ortega soon turned to retail, launching an sign format for his housecoats and lingerie in the early 1970s. In 1975, however, Ortega, then 39 long snip old, hit upon the formula that was to bring him his biggest triumph. In that form, Ortega opened a juvenile retail store called Zara, which featured low-priced lookalike products of popular, higher(prenominal)-end habilitate fashions. The store proved a success, and the followers family Ortega in unifiedd his business under the name Goasam and began opening night to a greater extent Zara stores in Spain.Despite the stores growing popularity, Ortega himself re mained decidedly behind the scenes, avoiding the limelight and developing a reputation for himself as a recluseno photographs of Ortega were make publicly procurable until cc1. By the early 1980s, Ortega had begun formulating a new-fashioned type of design and dis persion moulding. The trim industry followed design and proceeds processes that needful long lead convictions, a lot up to sextuplet months, betwixt the initial design of a cloak and its delivery to retailers. This mannikin effectively hold in industriousnessrs and distributors to just ii or iii collections per year.Predicting consumer tastes a conduct of time presented inherent difficulties, and producers and distributors face the regular luck of change state saddle with unsold inventory. Ortega sought a content of breaking the model by creating what he called instant or fast fashions that allowed him to speedily respond to shifts in consumer tastes and to newly acclivitous trends. Ortegas dream remained unfulfilled, however, until he met up with Jose fe phallic person horse Castellano. A computer expert, Castellano had worked in Aegon Espanas schooling technology segment before becoming chief pecuniary officer for a Spanish subsidiary of ConAgra.Castellano get unitedly Ortega in 1984 and set to work developing a statistical distribution model that revolutionized the global habiliments industry. Under Castellanos computerized system, the keep troupe reduced its design to distribution process to just 10 to 15 days. Rather than placing the design onus on a superstar designer, the connection developed its own in-house squad of designers more(prenominal) than 200 by the turn of the twenty-first century who began developing clothes found on popular fashions, while at the same time producing the companions own designs.In this way, the team was able to respond well-nigh outright to emerging consumer trends as well as to the demands of the connections own customers for instance by adding new colors or patterns to existing designs. progressive production and wargonhousing procedures, as well as the installation of computerized inventory systems linking stores to the callers growing enumerate of factories, enabled the caller-o ut to avoid taking on the risk and uppercase outlay of developing and maintaining a large back inventory. The leaner, more responsive company which adopt the name of Industria de Diseno Textil S.A. , or Inditex, in 1985 captured the anxiety of Spanish shoppers. By the end of the decade, the company had opened more than 80 Zara stores in Spain. The companys fast fashion model, which completely turn its retail agate line every two weeks, also promote customers to return often to its stores, with delivery day becoming cognise as Z-day in some commercializes. The familiarity that wear items would not be available for very long also encouraged shoppers to make their pur shacks more a cubic yard. The success of the Zara model in Spain led Inditex to the global merchandise at the end of the 1980s.In 1988, the company opened its first foreign store in Oporto, Portugal. The following year, Inditex go into the get together States. surviveer in that market remained elusive , however, and at the beginning of the 2000s, the company had opened just six U. S. stores. A more receptive market for the Zara format existed in France, which Inditex entered in 1990. The company quickly began adding new stores in major(ip)(ip) city sum of moneys by dint ofout the country. Through the 1990s, Inditex added a regular(a) stream of new markets. The company entered Mexico in 1992, Greece in 1993, Belgium and Sweden in 1994, Malta in 1995, and Cyprus in 1996.In the late 1990s, Inditex stepped up the stones throw of its international expansion, adding Israel, Norway, Turkey, and lacquer (the latter in a joint-venture with a local partner) in 1997, then, in 1998, moved into Argentina, the United Kingdom, and Venezuela. plot of land the bulk of the groups stores remained company possess, in authoritative markets, such as the Middle East, showtime in 1998, Inditexs expansion took place by dint of franchise agreements with local distributors. By 2000, Inditex had a dded other dozen or so countries to its range of operations, including Germany, the Netherlands, and Eastern europiuman markets including Poland.At the same time as Inditex pursued its geographic expansion, it also began expanding beyond its flagship Zara retail format. The company launched the Kiddys family childrens wear format as a subgroup of the main Zara creation in the early 1990s. In 1991, the company added an entirely new retail format, Pull & Bear, which began providing urban fashions. By the beginning of the 2000s, the Pull & Bear chain had grown to 300 stores in about 20 countries it also produced its own beginning format, Often, targeting the 20- to 45-year-old mens segment, in 2003.Inditex went upmarket in 1991 when it bought 65 pct of the Massimo Dutti group. Inditex took full find out of Massimo Dutti in 1995 and began construct it into a chain of nearly 300 stores in 23 countries. While Massimo Dutti appealed to a more sophisticated mens and womens fashions market, the company targeted the young female market in 1998 with the creation of a new format, Bershka. That retail chain quickly evolved into a network of more than 200 stores operating in 11 countries. Inditex keep adding new formats at the turn of the twenty-first century.In 1999, the company acquired Stradivarius, a youth fashion chain present in cardinal countries. In 2001, Inditex added its lingerie format, Oysho. In 2003, Inditex moved beyond the garment dole out for the first time, launching its own home furnishings concept, Zaras place and in 2008, launched its fashion accessories chain Uterque. Meanwhile, Inditex had begun a corporate evolution as well. As Ortega approached retirement, and no members of his immediate family appe bed likely to succeed him in the business, the company looked to the public market to run into its future.In 2001, Inditex listed its stock on the Bolsa de Madrid, one of the approximately successful initial public offerings of the year. O rtegas sale of more than 20 percent of his holding in Inditex do him Spains wealthiest man. In 2010, he still controls 59% of Inditexs apportions (see cast up 1) and was ranked by Forbes magazine publisher as the 9th richest man in the world in their yearbook list of one thousand jillionaires up 1 place from his ranking in 2009 with a net worth bringing close togetherd at $25 billion. He is flat 74 days old. Inditex moved to a new corporate head accommodate in Arteixo, away of A Coruna in 2000.In 2002, the company began formula on a state-of-the-art logistics center in Zaragoza. At the same time, Inditex act adding to its array of international markets, opening stores in Luxembourg, Iceland, Ireland, Jordan, and Puerto Rico in 2001 Switzerland, Finland, El Salvador, and capital of Singapore in 2002 and Hong Kong in 2003. In the 6 geezerhood from 2004, Inditex has more than doubled its number of stores from just all oer 2000 in mid(prenominal) 2004 to everyplace 460 0 by 31 January 2010. Inditexs financial year end is 31 January.In line with Inditexs yearly tracks, this case study carry ons to its year ending 31 January 2010 as pecuniary year 2009 or 2009. Similar abbreviations argon made for to begin with years . Inditex Gr oup Stor e Number s and Locations in 2010 At financial year end for Inditex for 2009 31 January 2010 Inditex had 4607 stores as follows The abridgment of Inditex s 2009 sales for each of its 8 store concepts was as follows Within the union, 3983 were company managed stores and 624 were franchised see offstage 2 for exposit. In 2009, 92% of sales were in company owned stores.Geographically, 1900 of the stores were in Spain, 1856 stores were in other europiuman countries, 485 stores were in Asia and Africa and 366 stores were in unification and mho America see subjoin 3 for details. The Group opened 343 stores in 2009 and increased its retail network in all of Europes major markets with noteworthy return in Russia (37 new stores) and Poland (34). In Asia, Inditex proceed its strategic push into the portions top lead markets, which posted world-shattering increase, with 41 new stores in mainland china, 12 in South Korea and 10 in japan. sell sales bea increased by 8% in 2009 see offstage 4 for details by store concept. During its first quarter 2010 from 1 February to 30 April , Inditex opened a further 98 stores as follows This took the numerate number of stores to 4705 at 30 April 2010. The percentage of Inditexs sales masterd in each geographical region for the sound 3 financial years was as follows 2009 31. 8 % 45. 7 10. 2 12. 2 2008 33. 9 % 44. 8 10. 7 10. 5 2007 37. 5 % 42. 4 10. 8 9. 4 Spain Europe excl.Spain Americas Asia The bollocks up ket The coiffure retail industry consists of the sale of all menswear, womenswear and childrenswear. The sphere of influence also includes footgear, sportswear and accessories. The menswear sector includes all garments made for men and boys. It includes both outer and under garments. The womenswear sector consists of the retail sale of all womens and girls garments including dresses, suits and coats, jackets, tops, shirts, skirts, blouses, sweatshirts, sweaters and underwear .Both womenswear and menswear can be segmented by purpose or use of the clothes item eg casual wear, essentials, activewear, formal wear , redundant occasion formal wear and overclothes age group lifestyle eg flash, conservative , fashion conscious , hippy, urban, rural ethnic group styles eg Afro-Caribbean , African American , Asian or middle eastern or music group styles eg rapper, reggie, punk, provenance price eg ranges from low price to expensive designer label to exclusive haute couture of Paris, Milan, London, capital of Japan and New York or by a combination of these factors.The childrenswear sector is defined as sales of garments for children between the ages of 0-2 years. The socio-political environments coupled w ith the film for individual and group identity makes retail uniform essential to consumers. Style, however, is an abstract concept that defines individuals, is often an extension of personality and thence highly individualized. Fashion, by its very nature, is unforeseeable. The products are determined by trends in society, designers and productive industries and are subject to sharp and unpredictable changes.Where customer brand loyalty exists, it is more likely to be to the designer than the retailer, although this is commonly towards the top end of the industry. Counterfeiting of brands is a fuss in parts of the wearing and accessories industry. pervert ket in Eur ope The European fit retail industry grew by 2. 1% in 2008 to reach a observe of 287. 7billion ($420. 9 billion). Its fresh history per Datamonitor 4) was as follows The consumer market for vesture and footgear in the European Union (or EU) has undergone important changes in modern years 5).Arguably, the greatest impact has come from market forces under the auspices of the ground Trade Organisation (WTO) as a ten-year transitional Agreement on Textiles and tog (ATC) came to an end with the abolition of textile and dress import quotas on 31 celestial latitude 2004. With the removal of quotas, thither was an initial increase in comparatively cheap imports of fit out and footwear into the EU, mainly originating from China. For example, in the first 40 days after the end of the ATC, imports of trousers from China were 3. 3 times higher than during the whole of 2004 and imports of pullovers 4. times higher. A isobilateral agreement between the EU and China (the so-called Shanghai Agreement) on a further, transitional period during which the step-up of imports of enclothe could be managed through until the end of 2007 was agree in June 2005. In addition to trade developments, consumer groups and other bodies are increasingly holding manufacturers and retailers accountable for ensur ing that social standards and working conditions of their suppliers equal international labour standards. There are examples of retailers responding to this pressure.For example, in October 2007 the Inditex group signed an foreign Framework Agreement on corporate social responsibility with the International Textile, dress out and Leather Workers Federation (ITGLWF), which expresses the companys commitment to respect fundamental rights at work throughout their entire production chain. Fair trade garment initiatives have also been taken, generally to come across that a fair price is paid to producers who find out minimal social, and in some cases environmental, standards and that employment relationships between producers and buyers are more equal, primitively than guaranteeing core labour standards.There has also been a response at heart the EU to concerns about environmental and well(p)ty issues. These concerns have preponderantly focused on the use of chemicals (such as dyes, pigments or bleaches in the clothing manufacturing process) and on waste water discharge. On 1 June 2007, new legislation on chemicals and their safe use came into force across the EU. sink in (Registration, Evaluation and Authorisation of Chemicals) aims to improve the protection of gentle health and the environment through the founder and earlier identification of the inbred properties of chemical substances.Within the EU 5) household usance on clothing and footwear accounted for 5. 7% of heart household consumption wasting disease in 2005 The vast bulk of this, nearly three quarters, was played out on clothing garments Spending on clothing and footwear tended to rise as a function of income, with the upper income 20 percent in the 27 countries of the EU devoting 6. 1% of their total household budget to these products, while those in the lowest income 20 percent spend 5 % the ploughshare of total use fatigued on clothing and footwear was generally much high er among households with pendant children, rising to 7. % of the household budget for those households comprising two adults with dependent children, compared with 4. 6 % of the budget for single persons. Annual uptake on clothing and footwear averaged 800 per person in the 27 countries of the EU in 2006, with national averages ranging from ampere-second per person in Romania to 1200 per person in Italy . See extend 5 for details of 2000 and 2006 expenditure per person. everyplace the period from 2000 to 2006 , the flashiness of clothing and footwear bought rose in most countries of the EU particularly in the United Kingdom and Poland where volumes increased by over 40%.In contrast , Germany and Italy reported pedigrees in the volume of clothing and footwear bought (the only member states of the EU to do so). detail are shown at adjoin 6 for the 6 countries which account for over 70% of the EUs cosmos Germany, France, Italy ,UK, Spain and Poland . Over the same 2000- 2 006 period, whilst consumer prices for clothing and footwear declined by 0. 1% for the EU overall, thither were substantial differences in the Top 6 countries listed above.The UK save price decreases of over 20% , Poland of over 15% and Germany of over 2%, whilst price increases were recorded in Italy (over10%) , Spain ( over 13%) and France ( 1%) see cast up 6. Between 2007 and 2008 , the volume of clothing and footware bought in the EU overall declined by 0. 5% . France , Italy and Spain recorded declines of over 2% whilst Germany , UK and Poland recorded increases see join on 6. In 2008 , UK households spent less on average per week on clothing and footwear than at any time since 2001-02 6) Early indications are that volumes also fell in 2009 versus 2008 in Europe.France reported a year on year decline of 3. 6% . a) spoil ket Segmentation by Gender and come along Womenswear sales dominated the European apparel retail industry in 2008 4) generating 54. 4% of the industry s overall revenues 157 billion ($ 229 billion) . Menswear accounted for 30. 9 % 89 billion ( $130 billion)- and Infantswear the remaining 14. 7%. expand of womenswear market growth and sectionalization in Europe are shown at subjoin 7 and of the menswear market in Europe at amplify 8. b) synopsis by Major Countr y Italy accounts for 19% of the European apparel retail industrys value , Germany 18. % and the UK 14. 4% . Shares for other countries are shown at a lower place c) ball up ket lever For ecast The European apparel retail industry was curb by Euromonitor to grow by only 1. 3 % in 2009 versus 2008 including price changes. In 2013, the European apparel retail industry is forecast to have a value of 320 billion ($467. 6 billion), an increase of 11. 1% from 2008. exposit are shown at flank 9. d) Retail sham ce of Pur chases Consumers in Europe are able to purchase clothing and footwear from a wide conversion and large number of retailers, specialised and non- spe cialised.Specialist clothing and footwear retailers comprise bondage (such as H, C or Zara) and independent clothes stores. Nonspecialist retailers include department stores (that have clothing and footwear departments), hypermarkets and supermarkets, as well as mail- order retailers. According to Datamonitor, 69% of purchases of womenswear and 55% of purchases of menswear in 2008 was in chains or independent specialist clothing, footwear and accessories shops . Purchases at hypermarkets, supermarkets and discounters accounted for 19. 5% of womenswear sales and 12. 1% of menswear with department stores taking a 6. 9% of womenswear and 24. % of menswear in 2008 ( see make upes 7 and 8). There are generally higher levels of retail slow-wittedness in northern Europe5). The overwhelming majority of clothing and footwear sales in Germany, France and particularly the United Kingdom are made in non-specialist stores. The popularity of independent clothing and footwear retailers is consi derably higher in southern Europe. For example, in Italy and Spain, the highest correspondence of clothing sales was among independent retailers (65% and 53 % individually in 2004), and this tendency was even stronger in terms of footwear (76 % and 88 % severally in 2003).Despite these differences, clothing markets in Europe are generally becoming more concentrated, as clothing chains, department stores and supermarkets/ hypermarkets marketing clothing and footwear open supernumerary outlets in many of the countries that have joined the EU since 2004. Indeed, the structural make-up of clothing retailers in the EU has changed considerably over the past 15 years, according to a 2007 report on Business relations in the EU clothing chain carried out for and funded by the European missionary station 5).The market share of independent retailers in the five largest EU markets (Italy, Spain, France, Germany and the United Kingdom, that together account for almost three quarters of the EUs clothing market) declined from 46. 8 % of total clothing sales to 27. 1 % by 2007. In contrast, there was fast(a) growth in the share of strong suit chains (from 18. 7 % to 25. 1 %), hypermarkets and supermarkets (5. 1 % to 6. 8 %) and emerging formats such as variety stores and large sports chains (whose share of clothing sales collectively rose from 14. 0 % to 27. 2 %).A recent slew on consumer satisfaction 5) provides further entropy on the shopping habits of European consumers for clothing and footwear. More than half (55. 7%) of those vignetteed in the EU in 2008 replied that they themselves or a member of their household had bought clothing and footwear in a retail chain store, a somewhat higher similarity than for small, independent clothing retailers (50. 2 %). part stores (30. 7%), supermarkets/ hypermarkets (23. 0 %) and street markets (16. 3 %) were also popular places for buying clothes and footwear see enlarge 10. andmore, compared with a number of other p roducts, a relatively high proportion of European consumers used mail or phone order (8. 0%) or the Internet (6. 1 %) to purchase clothing and footwear. When purchasing clothing and/or footwear in 2008, 10. 9 % of EU consumers reported facing at least one problem 5). The most common complaint was product quality (69% of unsatisfied customers) followed by problems returning unwished-for goods (9. 2% of respondents) then quality of military service provided (8. 8% of respondents). Details are shown at extension phone 11.This data also provides an taste into consumers anteriorities when purchasing clothing and footwear . flub ket in the States Americans spent almost $326 billion on clothing and footwear in 2009 equivalent to only 2. 98% of disposable personal income the lowest ever in U. S. history. Spending on clothing as a share of income has go in 20 out of the last 22 years, from 4. 78% in 1988 to less than 3% in 2009 see Annex 12 for details . Quality, variety and availa bleness have all improved over the years . The same applies to footwear.Since 1992, prices in general have risen by 57%, while prices for clothing have move by 8. 5% see university extension 13. With monumentally falling prices in real terms, clothing has become more and more affordable almost every year, requiring smaller shares of US household income. This has freed up disposable income that can now be spent on other consumer goods (eg electronics, travel, entertainment, etc. ). Mar ket in Asia Pacific 7) The Asia-Pacific apparel retail market has been growing at a robust pace for the last hardly a(prenominal) years. The Asia-Pacific apparel retail industry generated total revenues of $224. trillion in 2008, representing a colonial annual growth rate (CAGR) of 4. 1% for the period spanning 200408. The performance of the industry is forecast to improve further and to reach a value of $259. 6 one thousand thousand by the end of 2013. key fruit Retail contest s Inditexs key competitors in Europe include Hennes and Mauritz ( H ) Levi Strauss ( via franchised and company managed stores and third party retailers) Adidas sportswear ( including Reebok ). In the UK, key competitors include Primark ( a divergence of Associated British Food) , Next, and Marks and Spencer . ASOS. com is a major retailer of mens nd womens clothes and accessories via the internet and is now the UKs largest independent on-line fashion retailer. Worldwide, key competitors also include geological fault and stiff sell (Japanese enkindle company of Uniqlo and Asias biggest clothing retailer). In terms of sales value, Inditex overtook breach in 2009 and is now the worlds largest clothing and apparel retailer. Summary financial profiles of Hennes and Mauritz, Levi Strauss , Primark and whirl are shown at Annexes 14 ,15 and 16. A recent name about the flow rate prospects for troubled sell is shown at Annex 17. Manufactur ing Sour ces Gener alKey suppliers to the retail clot hing industry are clothing manufacturers and wholesalers, with retailers able to source from both. Recently, significant increases in male monarch cost, dyes & chemical cost and rapidly rising cotton cost have strengthened supplier power in an industry that relies on the handiness of raw material. The wholesale and clothing manufacturing sectors in most countries, however, are fairly fragmented. As international trade liberalizes, clothing manufacturers in the developed regions such as Europe and America face substantial argument from manufacturers in low-wage regions such as Asia eg from China. uniform manufacturing is almost always labor intensive, overdue to the difficulty of automating processes such as the sew of garments. ). Key issue for clothing retailers in selecting its suppliers include price and quality volumes the capacity of its suppliers to cope with sudden changes in demand in an industry susceptible to changes in fashion social, political and environment al pressures to fit that suppliers in developing countries meet minimum international ethical standards for working, social and environmental conditions.Many major retailers such as Inditex, happy chance and Primark now undertake regular audits of their suppliers to ensure that such standards are met and maintained and report their findings as part of their corporate social responsibility in their annual reports. Manufactur ing Pr ocesses The key processes used in garment manufacture are as follows fabric manufacturing ( eg cotton or wool) spinning twine dyeing pattern printing finishing. authentic aspects are labour intensive eg fasten . Garment manufacturing from the finished cloth biting sewing and assembly buttons and accessories attachment.There have been many technological developments in materials used over recent years including non-iron shirts, washable silk and man- made fibres. Key Aspects of the Inditex Business Model 3) A) Over view The Inditex business m odel has a high degree of vertical consolidation compared to other models developed by its international competitors. It covers all phases of the fashion process design, manufacture, logistics and distribution to its own managed stores and has a strong customer focus in all its business areas.The key element in the geological formation is the store, a carefully intentional space conceived to make customers comfortable as they diagnose fashion concepts. It is also where Inditex obtains the schooling required to suit the offer to meet customer demands. The key to this model is the major power to suit the offer to customer desires in the shortest time possible. For Inditex, time is the main factor to be considered, above and beyond production costs.Vertical consolidation enables Inditex to shorten turnaround times and achieve greater flexibility, reducing stock to a minimum and diminishing fashion risk to the greatest possible extent. B) Design The success of Inditexs collec tions lies in the ability to name and assimilate the continuous changes in fashion, unendingly designing new models that respond to customer desires. Inditex uses its flexible business model to adapt to changes occurring during a chasten, reacting to them by bringing new products to the stores in the shortest possible time.The models for each season -over 30,000 in 2009 are developed in their entirety by the creative teams of the different chains. Over 300 designers -200 for Zara alone- take their main inspiration from both the prevailing trends in the fashion market and the customers themselves, through information received from the stores. C) Manufacturing A significant proportion of production takes place in the Groups own factories, which mainly manufacture the most fashionable garments.The Group takes direct control of fabric supply, marking and crude and the final finishing of garments, while subcontracting the garment- do stage to specialist firms located predominantly in the North-West of the Iberian peninsula. The Groups foreign suppliers, a high percentage of which are European, generally receive the fabric and other elements necessary for qualification the clothing from Inditex. The number of garments produced and available for sale at Inditexs stores has grown as follows from financial years 2005 to 2009 On 31 January 2010, Inditex had a network of 1,237 suppliers with which it maintains stable relationships and which are governed by its External Manufacturers and Workshops Code of Conduct. This polity describes the minimum ethical, working practice, quality, safety and environmental standards expected of its suppliers and must be accepted to maintain commercial relations with the Group. Further details of Inditex network of suppliers is shown at Annex 18. Inditex audits its network of suppliers regularly and ceased using cxlv suppliers in 2009 and 175 in 2008 because of their non-compliance.In 2008, the manufacturing sources in terms o f volumes of garments produced for Inditex were as follows 46% 11% 36% 5% 2% European Union Non EU Europe Asia Africa Americas D) Logistics all production, regardless of its origin, is received at the logistical warmnesss for each chain, from where it is distributed simultaneously to all the stores worldwide. The distribution takes place twice a week and each delivery always includes new models, so that the stores are always new their merchandise and offer.The logistics system, based on package designed by the companys own teams, means that the time between receiving an order at the distribution centre to the delivery of the goods in the store is on average 24 hours for European stores and a maximum of 48 hours for American or Asian stores. Inditex logistics centres are located in Arteixo (A Coruna), Naron (A Coruna), Zaragoza, Meco (Madrid), Tordera, Palafolls and Sallent de Llobregat (Barcelona), Leon and Elche (Alicante).Together, their surface area exceeds one trillion square metres. Further details are shown at Annex 19. In 2008, 700 jillion garments were distributed by d0 employees at Inditex logistics centres. E) Stor es In Inditex, the point of sale is both the end and start of its value adding processes, as the stores act as market information meeting place terminals, providing feedback to the design teams for each of the 8 formats and insurance coverage the trends demanded by customers. As retailers, the stores constitute the chains main advertising medium.Their chief peculiar(prenominal)s include Preferred locations in the worlds main shopping streets Meticulously designed window discovers Unique internal and external store design Tailored coordination and display of the product Excellent customer service. The main development strategy for the Inditex sales formats is the opening of stores managed by companies in which Inditex is the sole or majority shareholder. In 2009, 86% of stores were own managed. In smaller or culturally d ifferent markets, the Group has extended the store network through franchise agreements with spark advance local retail companies.The main characteristic of the Inditex franchise model is the total integration of franchised stores with own managed stores in terms of product, human resources, training, window- dressing, interior design and logistical optimisation. This ensures harmony in store management criteria and a global image in the look of customer around the world. F) opposite Aspects of Mar keting 1) Internet Each of Inditexs 8 store formats has its own website and these are constantly updated with the latest fashion offerings. In 2009 , the store websites were launched and included in social networking websites. 2) simile cardThe Intitex Affinity plank is the Groups payment and loyalty card legal for its holders in any Group giving medication Zara, Massimo Dutti, Bershka, Pull and Bear, Stradivarius, Oysho, Zara Home and Uterque. Available in Spain for more than 15 years, the Affinity Card is also held by customers in Mexico and Greece where it was launched in 2007, and in Portugal where it has been available since 2008. Currently there are more than a jillion Affinity Card holders in these quaternion countries. All of them have a card that offers financial advantages and methods of payment based on the holders needs. Inditex Financial Per for manceA summary of Inditexs financial performance over the last 6 years is as follows Details of Inditexs P for 2006 to 2009 are shown at Annexes 20-22 sales and contributions by store format are shown at Annex 23 equalizer sheets for 2006 to 2009 at Annexes 24 and 25 2006 to 2009 currency flow statements at Annexes 26 and 27. Details of Inditexs initiative Quarter financial results for 2010 are shown at Annexes 28 and 29. pig d of Dir ector s Shareholders approved the 2009 report at Inditexs July 2010 Annual planetary Meeting including the proposed dividend of 748 million up 13% on the prev ious year.Inditexs share price closed at 51. 20 on 29 July 2010 up 38% on its price of 38 a year ago see Annex 30. The plug-in of Inditex consisted of 9 Directors as at 31 January 2010 3 Executive Directors and 6 Non Executive Directors. The Executive Directors are Amancio Ortega Gaona ( prexy) Pablo Isla Alvarez de Tajera ( chief executive officer and inaugural Deputy Chairman. Appointed to dining table in 2005) Antonio Abril Abadin ( Board Secretary and commonplace Counsel). Their total remuneration was 4. 35 million in the year ended 31 January 2010. The senior management of Inditex who are not executive directors is shown at Annex 32.Their total remuneration was 10. 9 million in the year to 31 January 2010. Details of the instrument panel including the 6 non executive directors are shown at Annex 31. Employees Inditex is a multi-cultural and multi-racial company with 92,301 employees at 31 January 2010 representing more than 140 nationalities. On-going training play s an essential role, particularly that of store staff. This training, which also includes basics in customer service, focuses on specialist knowledge of fashion trends and the ability to seize and interpret the information that store staff receive from customers every day.The number of employees has grown as follows The largest percentage are employed in the stores as follows Inditex at once owns 13 textile manufacturing companies in Spain and 12 logistic companies including one for each of its 8 store formats. Inditex also has its own in-house phaseing contractor and several companies to manage its store and other properties. These companies are wholly owned by Inditex and their financial results and employee numbers are fully unite in those of the Inditex group. In 2009 81. 4% of Inditexs employees were female 18. % were male 40% of employees were full time 60% were part time. Inditexs Str ategy At his first appearance at the July 2010 AGM, Inditexs Deputy Chairman and CEO, Pablo Isla underscored confidence in the Inditex business model and its clear strategic focus on international expansion, currently targeted at European and Asian markets. He confirmed that Inditex has earmarked about 570 million in capital expenditure to open between 365 and 425 new stores in its financial year 2010 of which approximately 95% will be in Inditexs international markets outside Spain.Some 70% of the detach contracts have been signed although in some cases openings may be delayed until 2011. The plotted increases by store format are as follows Our priority is to focus growth in Europe and Asia, said Isla. We see significant opportunities in Eastern Europe and the Russian Federation, and there is a great latent to expand doughably in Europe for many years, as our market share is below 1% in most countries. He said the main areas of growth for Asia are China, Japan and South Korea. We see huge long-term potential for Inditex in Asia markets, he said.Over the nex t three years, the company expects to see space growth of between 8% and 10%. Isla was asked earlier by analysts why they arent paying out an even bigger portion of net income in dividends given the groups huge funds balance. Our main priority is to invest in the future growth of the business. We always indispensability a high level of flexibility we always wanted more steady growth in the dividend, rather than big jumps, he said. He also confirmed that Zara will start online sales in France, Germany, Italy, Portugal, Spain and the UK on 2 September, 2010.Key Issue to be Consider ed Is Inditexs current strategy likely to succeed . If so why ? Or do you shut down that the strategy needs to be change in light of your analysis of this case study ? If so, what changes do you propose and why ? References 1) 2) 3) 4) FT article 9 June 2010 Answers. com 2010 Inditex squelch dossier 2009 Datamonitor Apparel retail in Europe August 2009 . The industry value is cypher at retail marke ting price (RSP), and includes all taxes and levies. The data for Europe includes Russia, Poland, Czech Republic, Hungary, Romani and Ukraine.All currency conversions in the Datamonitor report and forecasts have been calculated at constant 2008 annual average exchange rates. 5) European way report Consumers in Europe 2009 published by Eurostat 6) UK Office for field of study Statistics January 2010 7) Datamonitor report Apparel retail in Asia Pacific August 2009 Shar eholdings of Dir ector s in Inditex as at 31 J anuar y 2010 Annex 1 Annex 2 Annex 3 foliate 1 Annex 3 scallywag 2 Annex 4 gross revenue Ar ea by Stor e belief Squar e Metr es Totals 2,180,889 1,914,493 EU Expenditur e on Clothes and Footwear per head 000 Countr y EU (27 countries) 700 Belgium 700 Bulgaria N/A Czech Republic 200 Denmark 800 Germany 800 Estonia 200 Ireland 900 Greece 600 Spain 600 France 700 Italy 1100 Cyprus 800 Latvia 200 Lithuania 100 Luxembourg1100 Hungary 100 Malta 500 Netherlands 800 Austri a 1100 Poland 200 Portugal 600 Romania N/A Slovenia cd Slovakia 100 Finland 600 Sweden 700 United Kingdom potassium Memo Turkey 300 Iceland 1100 Norway 900 Switzerland 900 2006 800 800 N/A 300 N/A 800 cd 900 800 700 700 1200 900 N/A 400 1100 200 400 800 1100 200 N/A 100 500 200 800 N/A 1100 300 1100 N/A 900Annex 5 Source Consumers in Europe 2009 edition published by Eurostat , the statistical office of the European Commission Pr ice and Volume Changes within Household Expenditur e on change state and Footwear EU Aver age and Selected Countr ies (a) Annex 6 Germany France Italy UK Spain Poland EU come (b) Cumulative Percentage Price development/(Decrease) 2000-6 (2. 6) % 0. 1 10. 4 (23. 5) 13. 3 (15. 7) 0. 1 % Cumulative Percentage Volume outgrowth/(Decrease) 2000-6 (1. 7) % 5. 8 (8. 3) 44. 5 2. 7 44. 3. 5 % Percentage Volume Increase/Decrease) 2006 -7 2007 -8 3. 1% 1. 7 0. 1 2. 7 4. 5 4. 5 2. 0% 1. 4 (2. 1) (2. 6) 4. 4 (2. 5) 11. 2 (0. 5)% (a) = The 6 countries account for over 70% of total EU population (b)= over the 27 member countries Eur opean Mar ket for Womenswear Annex 7 Annex 8 Eur opean Mar ket for Menswear Eur opean Appar el Mar ket Value For ecasts Annex 9 Page 1 Eur opean Appar el Mar ket Value For ecasts Annex 9 Page 2 EU Clothing and Footwear Sour ces of Pur chase 2008 Annex 10Note that these figures relate to trips made by consumers purchasing clothing and footwear, and they do not reflect the average expenditure or value of sales made in each retail format customer Complaints Pr oblems faced by Consumer s when Pur chasing Clothing or Footwear in the EU in 2008 Per centage shar e of those exper iencing pr oblems (multiple answer s allowed) Annex 11 Source Retail satisfaction survey, IPSOS for the European Commission, August/September 2008 USA Clothing and Footwear Mar ket Annex 12 Annex 13USA Mar ket Consumer Pr ice Index Changes Annex 14 Summar y Financial Pr ofiles of Selected Appar el Retailer s H 1738 stores in 33 countries as at November 2008 Levi Strauss Gap Latest results for Gap for its financial year ended 31 January 2010 (Fiscal form 2009) are shown in next fender . At average 2009 calendar year exchange rates of US $ 1. 3948 = 1 , Gaps net sales totalled 10,179 million in 2009 some 900 million lower than Inditexs sales of 11,083 million for the same period ended 31 January 2010 .January 2010 average exchange rate was US$ 1. 4272 = 1 Exchange rate source Banque de France Annex 15 Source The Gap Inc. annual report and accounts Annex 16 Number of stores 191 Number of stores opened in year 12 5 in Spain -4 in the UK 1 in each of Netherlands, Germany and Portugal ( first Primark stores in each country) be after store openings in next year 11 ( including first store in Belgium) Selling space 5. 9 million square feet an increase of 9% versus prior year Pr imar k Key Data for division Ended 12 September 2009Revenue for year ? 2314 million ( ? 1933 m in prior year) Year on year sales growt h 20 % partly increase in selling space partly like- for- like sales growth of 7% operate profit for year ? 252 million ( ? 233 million in prior year) Source ABF annual report and accounts Annex 17 Cur rent Prospects for Uniqlos parent Fast Retailing Tadashi Yanai the president of Fast Retailing, Japans wealthiest man (net worth $9. 2bn), has seen the value of his 27 per cent holding in the Uniqlo parent fall by more than a quarter this year.Thats a fall away three times worse than the benchmark, making Asias biggest clothier the worst-performing retailer across the region. Having watched new lines like polo shirts and jeans fail to wing off the shelves, even after conscienceless price cuts, Yanai-san is now betting big on camisoles, leggings and Silky Dry, a summer version of its blockbuster heat-trapping underwear. This is no characterless lean spell sales growth slowed the most in four years in the three months to May, causing Fast Retailing to trim its net income est imate for the year ending August by 5 per cent.Nimbler rivals such as United Arrows (up 22 per cent since the beginning of the year) and Honeys (+143 per cent), both between 30-40 times smaller by market capitalisation, will want to ensure Uniqlos discounting continues. For all its determination to build overseas this year it added stores in China and Russia to its UK, US, France and South Korean portfolios the company is on course to get 95 per cent of this years operating income from anemic Japan. It remains a hard stock to divest, though.Not only are Fast Retailings returns on invested capital consistently about 50 per cent better than peers, it is that rare thing in Japan a stock worth a fifth more today than it was ten years ago (over which period the Nikkei has shed more than two-fifths). BACKGROUND NEWS Japans Fast Retailing on Thursday cut its annual lookout station for the first time in three years after the breakneck pace of growth at its Uniqlo budget fashion chain ca me screeching to a bridle in recent months, reports Reuters.Fast Retailing enjoyed strong sales last year even as other retailers were hit by weak consumer spending, attracting thrifty shoppers with hit products like heat-trapping underwear and savvy marketing. But Uniqlos same-store sales have been on the decline in the second half of the current financial year to August 31st, which some analysts see as a sign that the recent round of robust growth has run its course. Source FT article Published July 8 2010 Annex 18 Details of Inditex Suppliers Key supplier countries include Bangladesh, India, Turkey, Morocco , Spain, Portugal and Cambodia (Source 2008 annual report)Annex 19 Inditex Logistics Centr es in 2009 Inditex Pr ofit and Loss Account for Financial Year s 2009 and 2008 Annex 20 Notes refer to details in Inditex annual report for 2009 see Inditex. com/investor relations/annual reports/2009 Operating Expenses consisted of 2009 m 2008 m 2007-m 2006- m Staff costs 1,791 1, 703 1,473 1,251 storehouse property 1,134 1,028 855 718 rental costs another(prenominal) Store 1,027 976 898 831 operating costs, logistics and general smash-up costs a) 3,953 3,708 3,226 2,800 a) = Including transportation of merchandise from logistic centres to stores Annex 21Details of Financial Results shown in Inditex P& L Financial Results shown in the consolidated P& L consist of ( 000) And for 2007 and 2006 Inditex Pr ofit and Loss Account for Financial Year s 2007 and 2006 ( in 000s) Annex 22 Net Sales Cost of merchandise Gross Profit Operating Expenses Other net operating expenses & income Oper ating Pr ofit (EBITDA) amortisation and Depreciation Oper ating Pr ofit (EBIT) Financial Results faithfulness Accounting Losses Income Befor e revenue enhancementes Income Tax Net Income Net income attributable to nonage interests Net Income Attr ibutable to the Par entEarnings per share (cents) Notes refer to details in Inditex annual report for 2007 see Inditex. com/inves tor relations/annual reports/2007. Details of Operating Expenses and Financial Results are shown in earlier annexes Sales and Pr ofit Contr ibutions by Stor e For mat 2007- 2009 Store data formatting No. of Stores at 31 Jan 2010 1608 626 497 651 515 392 261 57 4607 Net Sales in Financial Year 2009 m 7077 771 790 1177 702 280 243 44 11084 Annex 23 Zara (incl Zara Kids) Pull and Bear Massimo Dutti Bershka Stradivarius Oysho Zara Home Uterque TotalsOperating Profit EBIT in 2009 m 1105 one hundred one 117 196 149 38 25 (2) 1729 Store coiffure No. of Stores at 31 Jan 2009 1520 583 470 591 456 374 239 31 4264 No. of Stores at 31 Jan 2008 1361 519 426 510 381 290 204 0 3691 Zara (incl Zara Kids) Pull and Bear Massimo Dutti Bershka Stradivarius Oysho Zara Home Uterque Totals Store Format Net Sales in Financial Year 2008 m 6824 720 722 1026 633 242 222 17 10407 Net Sales in Financial Year 2007 m 6264 614 696 925 521 213 201 0 9434 Operating Profit EBIT in 2008 m 1067 119 108 clv 144 21 14 0 1628 Operating Profit EBIT in 2007 m 1091 99 106 154 119 40 16 0 1625Zara (incl Zara Kids) Pull and Bear Massimo Dutti Bershka Stradivarius Oysho Zara Home Uterque Totals Inditex equalizer Sheets for Financial Year s 2009 and 2008 Annex 24 Notes refer to details in Inditex annual report for 2009. The share capital of Inditex amounts to 93. 5 million divided into 623. 3 million shares each with a par value of 15 Eurocents fully bid and paid at 31 January 2010 . This has remained unvaried since Inditexs financial year 2006 Inditex equipoise Sheets for Financial Year s 2007 and 2006Annex 25 Notes refer to details in Inditex annual report for 2007 Inditex bullion Flow Statements for 2009 and 2008 Annex 26 Annex 27 Inditex Cash Flow Statements for 2007 and 2006 Inditex Gr oup P& L for 1st Quar ter s 2010 and 2009 Annex 28 Annex 29 Inditex Gr oup Balance Sheet for 1st Quar ter s Ending 30 Apr il 2010 and 2009 Inditex Shar e Pr ice fr om August 2009 to J uly 2010 Annex 30 Source Inditex. com/ Investor Relations Annex 31 Boar d of Dir ector s of Inditex as at 31 J anuar y 2010The 6 Non Executive Directors are plant life Perez Marcote ( representing Gartler S. L. , the holding company controlled by Mr Ortega Gaona and owning just over 50% of Inditexs shares) Carlos Espinosa de los Monteros Bernaldo de Quiros ( display panel member from 1997) Francisco Luzon Lopez ( board member from 1997) Irene pity Miller ( board member from 2001) Juan Manuel Urgoiti Lopex de Ocana ( board member from 1993) Jose Luis Varquez Marino ( board member from 2005) of age(p) Management of Inditex as at 31 J anuar y 2010 Annex 32