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Zara owner's new budget battle

Wednesday, March 19, 2014 - 01:50

Mar 19 - Strong sales so far this year and a planned pick up in store openings suggest the world's biggest fashion retailer is returning to form after profit growth stalled last year. As Hayley Platt report Inditex is also joining in the budget battle with rivals.

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Zero growth isn't something the world's biggest fashion retailer is used to. Inditex, owner of fast fashion brand Zara, posted flat profits for 2013. It's a first in 13 years for the Spanish retailer. The firm was hit by refurbishing costs and by weakening currencies in emerging markets. Sales managed a 5 percent increase and there are signs of a return to growth this year, sending shares up more than 4%. Bryan Roberts is from Kantar Retail. SOUNDBITE: Bryan Roberts, Kantar Retail, saying (English): "Inditex is already in a very good position with the mainstream Zara brand accompanied by at least half a dozen other brands. Some of them more upmarket, some of them more affordable. So they've got a great portfolio of brands." Inditex owns eight high street chains in all, including Massimo Dutti, Bershka and Pull & Bear. But it's Zara which has been losing out to budget retailers like H&M and Forever 21. And it's austerity-hit Spain, the group's home turf, where sales have been falling. Five year's ago they accounted for 37 percent of total sales. Last year they were below 20 percent. Asian sales have even overtaken Spain's. But Zara has a secret weapon - its 20-year old discount sister company Lefties. SOUNDBITE: Bryan Roberts, Kantar Retail, saying (English): "Lefties brand could be an effective way of both clearing that surplus stock through a company controlled channel while at the same time giving less affluent shoppers the chance to pick up some more affordable clothing within the Inditex stable of brands." Inditex has done little to promote the discount store. They currently only exist in Spain and Portugal. But the retailer is beginning to recognise its new potential. It's been slowing increasing the number of Lefties stores while closing Zara outlets.

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Zara owner's new budget battle

Wednesday, March 19, 2014 - 01:50