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Zara’s Parent Is Permanently Closing Up to 1,200 Stores — but It’s Not What You Think

Zara parent Inditex SA plans to shutter as many as 1,200 outposts for good.

The Spain-based retailer, which posted today its first-ever quarterly loss, announced that it would “absorb” up to 16% of its global outlets — directing sales at those stores to nearby locations to create a fleet of bigger units. The closures, timed for this year and next, will affect smaller Zara, Massimo Dutti, Stradivarius and other banners’ stores that account for roughly 5% to 6% in sales.

Inditex intends to pivot toward e-commerce as well as expand its bigger and better-performing units: As part of its post-coronavirus strategy, it will invest about 1 billion euros, or $1.13 billion, in digital and 1.7 billion euros, or $1.93 billion, in store expansion. (Sales at its smaller locations that are set to shut down, the company added, will be either merged with neighboring locations or directed online.)

In a statement, the fast-fashion retail group said that it expects a “higher-quality network of better-located stores,” in conjunction with e-commerce, to generate long-term comps of 4% to 6%.

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“Stores will play a stronger role in the development of online sales due to their digitalization and capacity to reach customers from the best locations worldwide,” it added. “It is for this reason that we must focus on those high-quality stores that are best able to deliver on these long-term strategic goals.”

The move comes two months after widespread government-mandated lockdowns forced nearly all of Inditex’s brick-and-mortar fleet to temporarily close. (The company has 7,412 stores around the world.) It blamed the coronavirus pandemic for the 44% drop in sales to 3.3 billion euros, or $3.75 billion, as well as a loss of 409 million euros, or $464.21 million, from the prior year’s profit of 736 million euros, or $835.35 million.

Separately, e-commerce surged 50% in the first quarter and more than 95% in April as shoppers in a number of its largest markets were ordered to stay at home to prevent the spread of COVID-19, which has sickened 7.27 million people and led to at least 412,000 deaths. Inditex estimates that online revenues will represent more than a fourth of its total sales by 2022 — up from the prior year’s 14% — while gross space is forecasted to grow 2.5% annually, or half of what it was last year.

Inditex expects most of its major markets to have resumed business by the end of the month. It added that sales in China, Japan and South Korea — among the first countries impacted by the outbreak — were already reaching the same levels as last year.

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