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Financial Analysis: Inditez

Financial Analysis: Inditez. End of 2001 €340 million net income on revenues of €3,250 million 1,284 stores 515 outside of Spain generated 54% of revenue Capital Expenditure split 80% on new stores, 10% on logistics/maintenance 2002

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Financial Analysis: Inditez

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  1. Financial Analysis: Inditez • End of 2001 • €340 million net income on revenues of €3,250 million • 1,284 stores • 515 outside of Spain generated 54% of revenue • Capital Expenditure split 80% on new stores, 10% on logistics/maintenance • 2002 • €510-560 million of Capex, of which 230-275 was spent on new stores (across all chains)

  2. Financial Analysis: Inditex • May 2001 • Launch of IPO (26% of shares sold to public) • Stock price increased 50% by 2002 • Market valuation of €13.4 billion

  3. Financial Analysis: Zara • 2001 • Largest and most internationalized of all 6 chains • 507 stores, 282 of which were in 32 countries outside of Spain • €1,050 million of company’s capital (72% of the total) • EBIT at €441 million (85% of total) on sales of €2,477 million (76% of total)

  4. Internal Analysis: Technology • Just in Time Manufacturing • Enabled a Quick Response • Improved Coordination • Faster market shifts with increased flexibility • Reduced forecast errors and inventory risks • Compressed cycle time • Telecommunications • Supply, production, sales locations • Tracking system • Preferences • Repeat orders

  5. Internal Analysis: Vertical Integration • Backwards Integration • Manufacturing of most time-sensitive items • Ship directly from the central distribution center to stores • Fast cycle times • New design to finished good in 4-5 weeks • Modifications in 2 weeks • Industry had 3-6 month cycle times • Reduced working capital and enabled continuous manufacturing • Bulk of products out much later than competitors with more time to prepare

  6. Internal Analysis: Separate Business Units • Each brand was its own separate entity • Different Strategies, Product Designs, Manufacturing, Distribution, Image, Personnel, etc. • Group management • Strategic Vision, coordinated concepts, administrative services • Learning by doing • Created item daily, only about 1/3 was produced • Failure rate was 1%, industry was 10%

  7. Internal Analysis: Employee Training • Store Manager • Responsibilities • Hiring and Training • Small business feel • Salary • Incentive to earn up to half with performance • Training • 15 day training • Corporate for managers and overseas management

  8. Internal Analysis: Competitive Advantage • Value • Zara Name • Well known, scarcity, attractive ambience, fresh • Vertical Integrated • Control the supply • Quick turnover (no more than 3 days in warehouse) • Short supply chain and lead times • Organization • Organized to exploit their resources • Similar products in all stores

  9. Recommendations Keep investing in technology Advertise to get the name out there internationally

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