Zara, a fast-fashion brand, is still phasing out stores in bulk, while its parent company is turning in results that have doubled revenues. In the fiscal year 2024 (from February 1, 2024 to January 31, 2025), Inditex Group, the parent company of the Spanish fast fashion brand Zara, saw its revenue increase by 7.5% year-on-year to 38.6 billion euros, and its net profit increase by 9.0% year-on-year to 5.9 billion euros (about 304.3 billion yuan and 46.5 billion yuan respectively). Gross margin was 57.8%, unchanged from the same period last year.
Inditex Group achieved its best sales and net profit results in the 2024 financial year compared to previous years.
Oscar Garcia Maceiras, Chief Executive Officer of Inditex Group, said that the company achieved solid earnings growth thanks to the high quality of products from all the Group's brands, efficient operations and the continuous innovation of the team.
But from a growth point of view, its revenue and net income growth has slowed down, from the double digits and above of the past three years to single-digit growth.
In terms of market segments, Europe remains the most important market for Inditex Group, and "Europe outside Spain" contributed more than 50% of Inditex Group's sales in the fiscal year 2024. In contrast, the share of "Asia and other regions," which includes China, continued to decline to 15.7 percent from 16.9 percent in FY2023.
This is not the first time the region's share of the business has fallen. According to the financial report of the past years, from 2020 to 2023, Inditex Group's sales in "Asia and other regions" accounted for 23.2%, 19.7%, 18.1% and 16.9%, respectively, showing a downward trend year by year.
The decline in sales is related to changing consumer trends and the fact that fast fashion brands are not doing so well in the Asian market.
Take the Chinese market. As Generation Z gradually becomes the main force of current consumption, it often prefers fashion brands that are more personalized and more in line with social trends, while fast fashion brands that have been in China for many years have serious homogenization of styles, designs, etc., and the freshness of products is much less than before, which is difficult to stir up marketing waves in young consumer circles. At the same time, the strong rise of local fashion brands, foreign sports, outdoor clothing brands are also pouring in, lululemon, Anta, camel, Hoka, Vuori, etc., have seized the market share of fast fashion, industry competition has entered the Red Sea.
Domestic fast fashion consumer demand is weak, relying only on horse racing enclosure has been unable to effectively achieve long-term profit. "When the scale expands to a certain stage, the revenue growth rate cannot match its continued expansion, and the return on investment in the store naturally declines." No Agency fashion industry independent analyst Tang Xiaotang has pointed out to The Times financial.
Inditex is clearly aware of this. Since 2021, Inditex Group has closed all of its Pull&Bear, Bershka and Stradivarius stores in China. On March 12, Oysho, a lingerie brand turned sports brand, officially closed its last store in Beijing, leaving it with only one store in China, located in Tianhuan Square in Guangzhou's Tianhe district.
Its main brand, Zara, is also continuing to close stores. According to the National Business Daily, in 2024 alone, the number of Zara stores plunged by 81; In January this year, Zara has closed its four stores in Shenzhen, Changsha and Guiyang.
On the evening of March 13, Inditex Group Greater China related people told Time Finance that the information that Zara shrank 81 stores in the past year was untrue. Currently, Zara operates more than 70 stores in the mainland Chinese market and has been continuously optimizing and upgrading its stores by opening larger stores and bringing a more integrated fashion experience to Chinese consumers through efficient digital innovation technology.
Zara's big store model in the Chinese market has already started. According to the Inditex Information Center public account, Zara Nanjing Xinjiekou flagship store will open on March 21. It is reported that this will be one of Zara's largest stores in Asia, with more than 2,500 square meters of retail space, will adopt a new store image and product display, and set up a dedicated shoe and bag area. In addition, the Nanjing store will integrate online and offline platforms, so that customers can view the inventory status of goods in the store online in real time, and place orders online, which can be picked up in the store within two hours.
It is worth mentioning that the store will also introduce coffee format, opening Asia's first coffee selling Zacaffe. Eugenio Bregolat Lukashov, president of Inditex Greater China Group, has publicly said that the Nanjing store is the first Zara store in China with coffee elements, and this model has been successful in other countries and has been widely praised, so the decision to introduce this concept.
For the future store planning in the Chinese market, Inditex Group Greater China relevant people revealed that Zara will continue to upgrade other stores this year. "For example, the One Square City store in Shenzhen is currently undergoing renovation and is expected to be reopened in April; Shanghai Nanjing East Road flagship store upgrade has also been included in the plan. At the same time, we will also look for suitable flagship store locations in major cities such as Shanghai and Beijing."
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