In­di­tex Pledges On­line, Store Stock In­te­gra­tion by Year-end

WWD Digital Daily - - News - BY MI­MOSA SPENCER

The Span­ish re­tailer in­vested 150 mil­lion eu­ros in dis­tri­bu­tion cen­ters in Spain and the Nether­lands.

PARIS — Sig­nal­ing progress on the all-im­por­tant dig­i­tal front, Zara owner In­di­tex said on­line and store stocks will be in­te­grated into the same sys­tem by year-end, rais­ing the stakes not only for fast-fash­ion ri­vals but also dom­i­nant on­line re­tail­ers.

“This is very strate­gic for us, full in­te­gra­tion of on­line and stock­rooms,” said cap­i­tal mar­kets direc­tor Mar­cos López, cit­ing the abil­ity to of­fer prod­ucts in stores to on­line con­sumers.

Speak­ing on a con­fer­ence call with an­a­lysts fol­low­ing the re­lease of first-quar­ter re­sults, ex­ec­u­tives said Wed­nes­day that the project was first in­tro­duced in Spain last year be­fore adding 20 other mar­kets. The goal is to of­fer the ser­vice in all mar­kets with on­line busi­ness by the end of the year.

Ques­tioned whether this meant the com­pany would be us­ing space in its stores, which of­ten sit on valu­able real es­tate, In­di­tex ex­ec­u­tives es­ti­mated the im­pact of the cost was “neu­tral.”

“From a phys­i­cal point of view you only need a ta­ble and a chair,” in a stock­room, added López.

But an­a­lysts said they ex­pect the move should help the fast-fash­ion re­tailer avoid stocks of un­sold cloth­ing. It will be pushed for­ward, they noted, thanks to ra­dio fre­quency iden­ti­fi­ca­tion tech­nol­ogy, which tracks prod­ucts and is com­monly re­ferred to as RFID.

Swedish ri­val Hennes & Mau­ritz, which more re­cently has em­barked on rolling out RFID, has strug­gled un­der the weight on un­sold in­ven­tory.

In­di­tex was an early adopter of the tech­nol­ogy, which was fully im­ple­mented for the Zara brand in 2016, which the group ex­pects to fol­low with smaller brands Mas­simo Dutti and Pull & Bear this year, and the rest of the group by 2020.

In­di­tex con­tin­ues to in­vest in lo­gis­tics, but said the amount of cap­i­tal ded­i­cated to the task should ease up in the fu­ture. In­vest­ments in two lo­gis­ti­cal cen­ters topped 150 mil­lion eu­ros. One is in Spain, just a stone’s throw from the sprawl­ing, mod­ern com­plex that houses the com­pany’s head­quar­ters. The 90,000-square-me­ter space com­ple­ments ex­ist­ing lo­gis­tics plat­forms and is sched­uled to start op­er­at­ing this sum­mer. The other is in the Nether­lands.

The rise of in­ter­net com­merce has prompted re­tail­ers to in­vest heav­ily in high-tech dis­tri­bu­tion cen­ters, in­clud­ing on­line spe­cial­ists ASOS or Ger­many-based Za­lando, which has been open­ing new sites across Europe in­clud­ing France, Swe­den, Poland and Italy with an eye to re­duc­ing de­liv­ery time.

“De­mand for mod­ern space to sup­port au­to­ma­tion and e-ful­fill­ment oper­a­tions main­tains a strong up­ward tra­jec­tory,” noted retail spe­cial­ists from JLL in their an­nual mar­ket in­sights re­port on Euro­pean lo­gis­tics.

At In­di­tex, on­line sales grew 41 per­cent and ac­count for around 12 per­cent of sales in mar­kets where it has on­line oper­a­tions.

The re­tailer re­ported a 2 per­cent rise in first quar­ter net profit, as cur­rency rates weighed on sales growth across re­gions.

Sales growth in the last six weeks of the quar­ter was “sur­pris­ingly weak de­spite a strong re­bound in un­der­ly­ing mar­ket trends in April ver­sus Fe­bru­ary-March in coun­tries such as France and Ger­many,” noted Cedric Le­cas­ble, an­a­lyst with Ray­mond James in a note to clients. The an­a­lyst es­ti­mates like for like sales growth was merely flat in the sec­ond part of the quar­ter af­ter around 4 per­cent growth in the first.

Net profit to­taled 668 mil­lion eu­ros for the Fe­bru­ary-April pe­riod, while sales rose 2 per­cent to 5.65 bil­lion eu­ros. The in­crease came to 7 per­cent in lo­cal cur­ren­cies, as the com­pany opened new stores in 36 mar­kets and ex­panded and re­fur­bished ex­ist­ing units.

An­a­lysts flagged mar­gin im­prove­ment, which im­proved by 68 ba­sis points from the same quar­ter last year to 58.9 per­cent, as beat­ing ex­pec­ta­tions.

The first quar­ter re­sults were “broadly im­pres­sive,” said Bar­clay’s in an e-mailed note. The an­a­lysts noted that while sales fig­ures slightly missed ex­pec­ta­tions, profits were be­tween four and five per­cent ahead of ex­pec­ta­tions.

The re­tailer, with a sta­ble of brands that also in­cludes Ber­shka and Oysho, said it launched on­line sales in Aus­tralia and New Zealand.

Sales in­creased by 9 per­cent in lo­cal cur­ren­cies be­tween May 1 and June 11, it said. The Span­ish re­tailer has widened its dis­tance from Swedish ri­val H&M, which has strug­gled to adapt to on­line con­sump­tion fast enough to catch up with ri­vals.

Profit at H&M last year de­clined 13 per­cent and the com­pany has said it doesn’t ex­pect an im­prove­ment in sales and profit un­til the sec­ond half of 2018.

In­di­tex said it has dis­trib­uted 42 mil­lion eu­ros in April to 88,000 em­ploy­ees in var­i­ous ac­tiv­i­ties who have worked at the com­pany for at least two years.

A Zara store; par­ent

In­di­tex is in­te­grat­ing on­line and store in­ven­to­ries.

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