On the back of strong 2011 results, Spanish clothing retailer Inditex has revealed capital expenditure of around E950m (£795m) for 2012 as the retailer plans to open about 500 new stores across the globe to take its total past 6,000.
Inditex’s history of aggressive overseas expansion has so far paid off and enabled it to thrive during the continued consumer spending drought in Europe.
The retailer is beginning to gain traction in key BRIC markets such as Russia, where it opened 49 stores in 2011, and China, where 132 shops were opened – about one third of the group’s total openings. It is also forging ahead in India, unperturbed by restrictions on foreign ownership that have dissuaded rivals.
As a result, Inditex’s domestic sales accounted for roughly 25% of the total in 2011, down from 46% in 2002.
For multinational rivals H&M and Gap, on the other hand, Europe and the US respectively still account for the vast majority of their sales and both retailers are now, rather belatedly, having to look further afield for growth. Gap plans to have around 45 stores operating in China by the end of 2012. It will also try to increase the number of franchise partnerships, and plans to launch its first stores in Colombia this year as well as in South Africa, Azerbaijan, Georgia and Lebanon. H&M also plans to focus on China in 2012, while opening its first stores in markets as diverse as Bulgaria, Latvia, Malaysia, Thailand and Mexico.
In Gap’s US domestic market, by contrast, the retailer plans to close around a fifth of its stores in 2012. The US giant will instead be focusing on investing in flagship stores and its direct (ecommerce) businesses. Given the advanced shift towards shopping online in the country, this approach is one that other retailers and potential new entrants are likely to have to take in the US.
Inditex, meanwhile, will continue to invest both in stores and online in Spain, surprising perhaps given the severity of the economic crisis there. The retailer has embarked on a programme in which all 336 Zara and 159 Zara Kids stores will be remodelled to a new concept. The move signals that the retailer is taking a long-term view of the prospects its home market represents, and that it will not countenance losing its strong domestic position.
Nevertheless, even the mighty Inditex is likely to have to take some tough decisions about how to optimise its store portfolio once more Europeans take to the internet for their fashion needs.
- Matthew Stych, research manager, Planet Retail.
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