Zara’s parent company, Inditex, has announced it will be closing up to 1,200 stores as the company pivots toward an online sales platform after witnessing a 44% drop in retail sales.
According to reports, Inditex has said it will “absorb” anywhere between 1,000 – 1,200 stores, but will consolidate its losses on other brands in its portfolio like Bershka, Pull & Bear and Massimo Dutti.
Inditex is one of the world’s largest fashion retailers, but has seen its sales crash amid the coronavirus pandemic. The company revealed that between the 1st of February and 30th of April, sales were down 44% to €3.3 billion (AUD $5.4 billion), with Inditex reporting a €409 million (AUD $675 million) net loss.
As of June 8th, nearly 25% of Inditex’s 7,500 storefronts remain closed across 96 countries; during the first phase of the pandemic, this number rose to as many as 88% of its total storefronts.
The company has, however, seen a noticeable uptick in the number of online sales processed, with a 50% increase in year-on-year sales for the quarter, and a 95% year-on-year increase for April.
The Group’s Executive Chairman unveiled Inditex’s short-term plans, with €1 billion (AUD $1.6 billion) slated to bolster its online platforms, in combination with €1.7 billion (AUD $2.8 billion) to “further integrate the store platform.”
The company says that “this strategy is a culmination of the project the company has been investing in steadily and significantly since 2012, a project that will transform its profile notably. The overriding goal between now and 2022 is to speed up full implementation of our integrated store concept, driven by the notion of being able to offer our customers uninterrupted service no matter where they find themselves, on any device and at any time of the day.”
Inditex expects its total 2022 sales figures will be bolstered by 25% online sales, as opposed to 14% in 2019. Small shop fronts will be “absorbed” to make way for larger stores under the company’s ‘technology upgrade plan’.
Executive Chairman, Pablo Isla has said that “the overriding goal between now and 2022 is to speed up full implementation of our integrated store concept, driven by the notion of being able to offer our customers uninterrupted service no matter where they find themselves, on any device and at any time of day,” he said.
“As we have always said, people are what really matters for Inditex, beyond any other consideration, and I believe that the current situation we are living, prove it so,” Isla added.
Inditex has also said that “each store, whether online or physical, will become a sustainability hub: they will use less and renewable energy, eliminate single-use plastic, recycle all materials and foster the reuse of garments,” it said in a statement.
The company has said that it will hold its general meeting in July, where the Board will discuss its dividend offering to shareholders. “The company’s dividend policy, namely a payout of 60%, remains in place and also the bonus dividend totaling €0.78 per share. This was originally to be paid in 2020 and 2021 and now will be distributed in 2021 and 2022,” a statement reads.