MADRID – What retail crisis?
Amid a major retrenchment by American companies such as Gap Inc., J. Crew Group Inc. and Nordstrom Inc., one player continues to defy gravity: Zara. And the rapid-fire design-and-production system that has allowed the Spanish giant to outpace rivals is now giving it a powerful platform to succeed online, an outlet that has confounded its lumbering rivals.
On Wednesday, Inditex SA, Zara’s parent company, reported EUR654 million (about $733.3 million) in net profit for the first quarter, an 18% jump over the same period last year. Total sales at the world’s largest fashion retailer by sales climbed 14% to EUR5.57 billion.
The results are in contrast to the deep pain afflicting many of Zara’s rivals amid sea changes in the way consumers shop. Fewer shoppers visiting malls and online retailers squeezing the profits of traditional bricks-and-mortar outlets are upending the sector’s longstanding business model.
Chains such as J.C. Penney Co. and Sears Holdings Corp. are closing hundreds of outlets to stanch their losses. Just this week, J. Crew reported its 11th consecutive quarter of same-store sales declines, days after its longtime chief Mickey Drexler announced he will step aside.
Parent company Inditex makes 60% of its garments in Spain and nearby countries. That allows it to respond quickly to feedback from its store managers around the world, who feed daily updates to a 600-strong design team in Spain on what is selling and what isn’t. The creative crew whips up fresh ideas that go into production in days. The company’s Spain-based logistics centers are then able to constantly refresh the stores with small batches of new designs.
Inditex is leveraging that model into a winning online strategy, which it launched in 2010.
Zara’s quick turnaround time from…