Oscar García Maceiras on Inditex's record results and his first full year as the group's CEO
Two years after Oscar García Maceiras' arrival at Inditex, the CEO of the Spanish textile company stepped onto a minimalist podium in a large, brightly-lit room to present the company's financial results to a select group of journalists. In addition to the record figures set by Inditex last year, the event marked a turning point in the executive's career. The leader of the Spanish giant works hand in hand with Marta Ortega, the chairman and daughter of the company's founder and says he has an "extremely close and trusting relationship" with her. The year 2022 was Garcia Maceiras' first full year as CEO and the presentation of the group's annual results was his first solo debut. A year ago, he was accompanied by Pablo Isla, who officially bid farewell to the company at the press conference.
"The two words that best describe the year 2022 are 'demanding', given the complicated circumstances that have surrounded us, and 'exceptional', due to the work of the more than 165,000 employees at Inditex. We are satisfied and proud," Garcia Maceiras pointed out at the beginning of his speech that during the financial year Amancio Ortega's company increased its turnover by 17.5% to 32.57 billion euros and boosted its net profit by 27% to 4.130 billion euros.
Record turnover underpinned by the physical retail channel's strong performance
For the manager, these results are "the outcome of an integrated business model that operates at full capacity". And he went on to talk about the company's differentiating elements: "We are continuing to strengthen its four basic pillars: our fashion offering, by expanding our commercial offer to include collaborations with some of the most relevant industry professionals; the unique experience of our customers by incorporating cutting-edge technologies; sustainability and support for our people, as recently demonstrated by the agreement reached to improve the salary of our shop staff in Spain." With regard to employees, an area marked in recent months by trade union movements, the CEO highlighted future plans to "continue to offer professional careers full of opportunities and with increasing remuneration."
The all-time record turnover seems to have marked Marta Ortega's first year as president of the group, strengthening her decisions and the evolution of her strategy. According to Garcia Maceiras, "the group's growth in sales has been very much underpinned by the significant growth in footfall and sales in physical shops." During the last financial year, retail footfall increased by 23%, which the CEO praised, bearing in mind that this was achieved with "10% fewer shops and 6% less retail space than in 2021, mainly impacted by the suspension of operations in Russia and Ukraine." As the CEO pointed out, sales per square metre grew by 16%, while sales per shop increased by 30% compared to 2019.
While the executive did say that "online sales did very well," increasing by 4% to 7.806 million euros for the first time in years, the company declined to comment on targets set for the digital channel. However, the company has set itself the target of having online sales represent 30% of its turnover by 2024. Inditex is currently still short of this figure, although this goal is in line with other major players in the sector, with their online sales in 2022 accounting for 24% of global revenues. During the current financial year, Inditex will strengthen its digital platform with a new size recommender and a real-time personalisation system.
Physical retail is central to Inditex's strategy
"Today, it is impossible to explain the power of our online sales without taking into account the physical and operational support of our physical shops," said Garcia Maceiras, stressing once again the relevance of the company's "integrated model." "We believe that the online channel will continue to gain presence, but we believe that sales have to be interpreted in an integrated way. We have such an integrated model between physical and online shops that we cannot differentiate them," he responded when asked about the decreasing weight of the digital channel, insisting that "two thirds of online returns are made in physical shops and one third of online purchases are collected in shop." In addition, the brands' websites accumulated more than 6 billion visits, registering 16 million every day; and they already have 249 million followers on social media platforms and 169 million app downloads.
Inditex has continued to reduce its number of shops, from 6477 stores as of January 31, 2022 to 5815 as of January 31, 2023. This reduction of 662 shops is due to the closures of 134 Massimo Dutti stores down to 548, 122 Zara stores down to 1885 and 111 Bershka stores down to 860. "Our shop optimisation process, which has accelerated over the last few years, remains on track. We will continue to identify stores that do not exactly fit our large-space retail concept and that are worth closing. We have increased the floor space of our shops by 13% in recent years, so they are better located and more integrated with our online platform," said Garcia Maceiras, anticipating that net floor space will be positive at the end of 2023, with an expected growth of 3%. In 2022, net space declined by 6%, impacted by the suspension of activity in the Russian Federation.
Over the past 12 months, the company opened stores in 33 different countries, with the CEO highlighting the entry of some of the group's brands in new markets, such as Oysho in the UK and Stradivarius in Germany. The group also reported a total of 201 store openings, 186 store renovations (including 94 store enlargements) and 349 store closures. "We have identified enormous opportunities for growth in all markets and in all our retail formats," said the CEO of the group present in 213 markets, noting that the US market is the group's second largest. By 2025, Inditex will complete 30 projects in the country, including new store openings, enlargements and relocations.
"We are very satisfied with our development in the United States. Overall, we operate in an extraordinarily fragmented industry with a very low market share. In the US, we sell less than 50 cents of every $100 invested in fashion, so the opportunities for growth are extraordinary," he explained.
Looking to the future, the CEO said: "In 2023, we have relevant initiatives and projects that we believe will allow us to take a leap forward in the sector and in our vocation to positively transform our entire industry." Thus, the group will invest around 1.6 billion euros in various projects, such as increasing its logistics capacity in its distribution centres in Arteixo, Zaragoza and Lelystad (Zara), Tordera (Bershka) and Sallent (Stradivarius), "with a special focus on the optimisation and automation of operations."
Reclaiming the "headquarters effect" and a stable pricing strategy
"Inditex has its head office and tax headquarters in Spain, as well as those of the parent companies of all our brands. We have paid more than 6 billion euros to our 6750 suppliers in Spain and our tax contribution in the country has been more than 1.8 billion euros of the total of almost 7.5 billion euros of global tax contribution," explained the CEO, underlining that "it is the place where we were founded, where we feel comfortable and where we are going to continue to invest in terms of logistics and shop openings."
Despite inflation and the repositioning of some of its brands, García Maceiras insisted once again that the company has "a stable pricing policy, with selective adjustments taking into account each retail format, typology, market or product family." And he added: "We are going to maintain it in 2023. We rule out a price increase that does not correspond to these variables. We have always sought to find the right balance between the strength of our margins without affecting sales."
On the possibility of continuing to break records in the coming years, the executive concluded: "Prudence and humility are in our DNA, but we are extremely ambitious. Our very significant investments in 2023 are a response to this desire for growth that we continue to maintain in all markets."
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