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Bloomberg
The owner of the Zara clothing chain is facing skepticism among investors that it can keep up with the likes of Amazon.com Inc. in online retail.
While Inditex SA’s e-commerce revenue surged 41 percent last fiscal year and its websites are attracting more than 10 million visits a day, total sales grew at the weakest pace in three years and the gross margin fell to the lowest level in a decade.
The stock’s decline of as much as 5.2 percent shows how hard it is for Chief Executive Officer Pablo Isla to reassure investors that e-commerce will brighten the Spanish retailer’s future as it cuts back on store openings. After Swedish rival Hennes & Mauritz AB went into freefall and warm weather reduced demand for winter clothes in Europe this autumn, investors have started turning sour on Inditex, driving the shares to a three-year low.
“The profitability of online is the hottest topic in the sector,†wrote Michelle Wilson, an analyst at Berenberg, who said it’s unlikely that the shift to e-commerce will improve Inditex’s margins.
Inditex said e-commerce now represents one-tenth of sales, but that’s short of the global average for online retail, Wilson said. Even H&M generated 13 percent of sales online in 2017.
Inditex said it’s starting e-commerce in Australia and New Zealand, and its websites serviced as many as 249,000 orders per hour at peak sales periods in 2017.
Isla is preparing a new store concept that uses robots to deliver garments to customers from nearby warehouses. As the retailer implements RFID product-tracking technology, it’s making deliveries more efficient by relying on inventory in shops to satisfy same-day or next-day orders.
Pop-Up Store
Zara also opened a pop-up store in London in late January that is its first outlet designed primarily for collecting online orders.
The retailer signaled it’s reducing the pace of store openings, planning to increase new space in prime locations by 4 percent to 6 percent in coming years, 2 percentage points below the previous range.