Zara: greater turnover with even less stock

Zara: greater turnover with even less stock
Vytautas Kielaitis / Shutterstock.com

Inditex, the Spanish group behind Zara and many other brands, is continuing to live up to the claim of 'fast-fashion': thanks to fast production speeds and state-of-the-art inventory management, the fashion retailer was able to reduce stock-in-trade by 5 %, while sales increased by 7.5 %.

 

12 % increase in net profit

During the first nine months of 2019, Inditex posted a net profit growth of 12 % to 2.72 billion euros. Net turnover amounted to 19.8 billion euros, an increase of 7.5 % compared to last year. The cash position of the Spanish fashion giant rose to 7.7 billion euros.

 

The growth came courtesy of a very successful collaboration with pop star Billie Eilish and a strong e-commerce performance, with the retail group now operating online in more than 200 different countries. However, the fast-fashion giant's tight inventory management is particularly noteworthy: stock-in-trade fell by 5 %, while rival H&M– partly as a result of disappointing sales figures – still had about 5.2 billion euros in unsold stock and is struggling, according to Bloomberg.

 

Now even less stock

"Our business model has always been based on very low inventory. Thanks to RFID and full stock integration, we are now able to run the company with even less", CEO Pablo Isla told the American news agency. The group sews RFID tags into the clothing, so that items are constantly monitored throughout the supply chain; stock management and shipment to the stores is also automatic. 

 

Thanks to the short production and lead times, combined with low stock levels, the group is able to continuously adjust and make decisions, during the season, according to Isla. The proof that it works, according to him, can be found in the new Zara flagship store in Bilbao, which replaces four old stores. Despite a smaller surface area and 20 % less inventory, the new store outsells the four old stores combined.

 

For the full year 2019, Inditex predicts comparable revenue growth of between 4 % and 6 %. This is in line with previously expressed expectations. In order to further focus on technology, the company is adding French technology entrepreneur Anne Lange to its Board of Directors this year. She specialises in the 'Internet of Things'.