<h2>Moving Forward with a Well Planned Growth Strategy</h2> While most of the industry is focused on damage control, <a href="http://www.inditex.com" target="_blank" rel="noopener noreferrer">Inditex</a> has been fine tuning a savvy growth strategy. The company fared better than most during the height of the pandemic. Despite having 88 percent of its stores closed in Q1, sales fell only 44 percent. Part of what supported Inditex through these turbulent times was that it is less dependent upon any one market. For example, sales recovery in May were led by China, South Korea and Germany. In addition, Inditex’s legendary business model, which is based on having maximum supply chain agility, proved its true worth. These were key factors in why Inditex was able to maintain its gross margin of 58.4% of sales. At the end of April, inventories were 10% less than in April 2019, according to a company statement. Despite a €175 million net loss in Q1, Inditex remains financially sound – and is moving forward with its plans to meet 2022 goals. <h3><strong>Grow Online, Upgrade Stores, Invest in Prioritary IT</strong></h3> But what about that announcement about closing 1200 stores? Part of that plan includes opening <a href="https://insidefashionlive.net/green-shoots-as-retailers-re-open-in-china/">450 new large stores</a>, including a mega store in Barcelona, Spain. Ultimately, Inditex plans to have a network of 6,700 – 6,900 stores, about 8% less than its current 7,412. The stores that will close are smaller stores and represent only 5-6 percent of Inditex’s total sales. New stores will be larger, higher quality, and IT-driven. The comprehensive plan includes investing €1 billion in bolstering its online business and a further €1.7 billion in upgrading its integrated store platform. Inditex has also carefully mapped out a forward thinking strategy to integrate its online platforms with its physical stores. <h3><strong>Q1 Financial Snapshot</strong></h3> <strong>Sales:</strong> €3.3 billion, - 44% year-on-year <strong>Gross Margin:</strong> 58.4% <strong>Net Profit:</strong> €-175 million net loss <strong>April inventory:</strong> 10% less year-on-year <strong>Operating Expenses:</strong> down 21% year-on-year <strong>Net Cash Position:</strong> € 5.8 billion (compared to €6.7 billion a year ago) <strong>Note:</strong> Inditex made a provision of €308 million related implenting its new online and store integration plan. <h3><strong>Parallel Growth Strategies: Dual Expansion of Online and Offline</strong></h3> Online sales are expected to account for 25% of total sales by 2022, up from 14% in 2019. Growth will be driven by an integrated online-store network that is structurally nimble, sustainable and smart. At the same time, Inditex plans to consolidate many of its smaller stores into fewer but larger, higher quality stores, that will have higher levels of profitability, and help to generate the company’s target of 4-6% like-for-like growth annually. <h3><strong>Store Strategy</strong></h3> <ul> <li>Bigger and better</li> <li>Integrated with online</li> <li>New technology-driven services</li> </ul> <strong>Goal:</strong> 6,700-6,900 stores, 8% less than the 7,421 current store count. <ul> <li><strong>Rightsizing retail:</strong> Inditex will close about 1,200 of its current stores and open 450 new stores. </li> <li>Basically, the company is cutting those stores that are underperforming. </li> <li>The stores that are being closed acccount for only 5-6% of Inditex’s total sales.</li> <li>Most of these smaller stores are older stores belonging to brands other than Zara.</li> </ul> <h3><strong>Online Strategy</strong></h3> <ul> <li>Push online sales of Bershka, Pull&Bear and Stradivarius in China and Japan</li> <li>Integrate online and offline stores – especially in the US and EU</li> <li>Unified vision of the integrated stock needs real-time processing and it has been implemented through a proprietary IT platform, Inditex Open Platform (IOP).</li> </ul> <h3><strong>A New Retail Logistics Strategy</strong></h3> Each store will act as a fashion distribution hub in the center of strategic shopping districts of the world’s leading cities. This will create an interconnected global distribution network that is responsive to emerging shopping habits. Inditex plans to continue with the store upgrade plan underway since 2012 under which it has opened a total of 3,671 stores that are larger, in more high-profile locations and already integrated with online. Indixtex's brands opened 19 new stores during the first quarter 2020, as well as expanding and refurbishing some of their flagship stores in markets including Spain, China, Portugal, Morocco, Lithuania, Croatia, Korea and Saudi Arabia. <h3><strong>The ‘Store Mode’</strong></h3> Another important development in the pipeline is what Inditex refers to as its ‘Store mode’ concept. Here the brands’ mobile apps and websites will provide customers with new services such as the ability to consult store stocks in real time for online purchase and immediate collection, and pinpoint the precise location of a specific item within a given store. This ties in with CEO Paolo Isla's target of having all of the products of all of its brands available for purchase online anywhere in the world by the end of 2020. <h3><strong>Retail Forward</strong></h3> According to Inditex, an upcoming highlight is the opening of Zara’s new store in WangFujing (Beijing, China). Not only will this be the largest flagship store in Asia, it will also be the most advanced Zara store in the world, featuring the latest technology and services to offer a seamlessly integrated shopping experience. Also scheduled to open are the Zara Place Vendome in Doha (Qatar) as well as newly extended and refurbished Zara stores on Paseo de Gracia in Barcelona, Spain, and the Calle 82 store in Bogota, Colombia.