Daily Express

Zara parent adds zip to its online operation

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THE pandemic has separated the weak from the strong in the retail world. Inditex, the Spanish parent of fashion retailer Zara, is firmly in the latter category.

The past year’s lockdowns blew a hole in the group’s sales and profits. But it also accelerate­d the shift toward online shopping – somewhere the fashion giant already had a head start.

The group used 2020 to integrate its online and physical store inventory. This makes it easier to track items and allows local stores to fulfil online orders.

As a result, fewer garments are sitting around going out of style, keeping its brands on the frontline of fashion. The new system also makes it cheaper and faster to get clothes to customers– something that consumers have come to expect.

Inditex also cut its physical footprint to focus on large stores in prime locations. This should reduce operating costs and help with the integratio­n of physical and online stores.

With a cash position upwards of €7billion (£6billion), Inditex has plenty to assist in the transition. That kind of security net is rare among retailers, especially now. That said, there is still uncertaint­y to contend with. Zara is often first to pounce on new trends and can charge a premium. But the higher price point could become a hindrance if the economy doesn’t bounce back as expected. Shoppers turn to cheaper alternativ­es when times are tough.

Valuation is also a concern. Zara’s share price has returned to prepandemi­c levels. The business is still recovering though. The last update showed sales are still down 11.5 per cent compared with 2019 and profits are €313million (£268m) short of pre-Covid levels. There’s evidence things are picking up, but it’s not clear whether that’s enough to hang your hat on yet. High expectatio­ns may cause ups and downs in the near term.

Longer-term, we think Inditex is in a good position to leapfrog some of its high-street competitor­s that haven’t adjusted through the pandemic. It just needs the economy to get in line.

“This article is designed for investors who make their own decisions without advice, if unsure whether an investment is right for you, you shouldseek advice. Shares can rise and fall in value so you could get back less than you invest.”

 ??  ?? LAURA HOY EQUITY ANALYST Hargreaves Lansdown www.hl.co.uk
LAURA HOY EQUITY ANALYST Hargreaves Lansdown www.hl.co.uk

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