Retail news from around the globe

Zara owner sees less as more

Inditex, the world’s largest clothing retailer and the owner of Zara, is still backing bricks-and-mortar as a driver of growth, despite a run of store closures in its home market Spain. 

Although it has shrunk its Spanish store network  – by far its biggest portfolio globally – by 297 stores, or 15 per cent, since 2012 – the company says it has actually increased its overall selling space in Spain by opening or expanding flagship outlets in prime locations.

In Bilbao, for example, Reuters reports that Zara opened a three-storey store last year in a historic building in the centre of town – complete with chandeliers, marble columns and stained-glass windows – while shutting three smaller stores in the city.

Inditex has nearly 7500 stores globally, over a quarter of which are fast-fashion leader Zara, with its other brands including Bershka, Stradivarius and Pull & Bear. That is almost twice as many as both the Gap and Uniqlo owner, Japan’s Fast Retailing, and around 2500 more than Sweden’s H&M.

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The accelerated closure of stores, however, has added to investor concerns about falling margins at Inditex in the face of increased competition.

Steinhoff struggles to restore reputation

South African retail group Steinhoff International has reported a €1.2 billion ($1.9 billion) annual loss for fiscal 2018. The group cited lingering fallout from the $10 billion accounting fraud involving senior executives that first came to light in December 2017.

Under new management and working to clean up its balance sheet after the fraud, Steinhoff blamed one-off expenses, including professional fees of €117 million and impairments, for its 2018 loss. Sales were also affected by asset disposals to shore up liquidity as well as tough trading conditions. 

The retailer had to repeatedly delay the release of its results for 2017 and 2018 as it waited for the outcome of an investigation by auditor PwC into the scandal and for audits from external auditor Deloitte, which kept missing deadlines due to the complexity of the fraud.

While the group reduced losses by 70 per cent compared to the €4 billion figure in 2017, Steinhoff warned that damage would continue to weigh on its performance this year. The half-year results for 2019 are scheduled for release on July 12.

French protests hit spirits sales

Spirits sales in France fell in 2018, a situation the French industry association, Fédération Française des Spiritueux, blames on the “yellow vest” anti-government protests late last year.

The protests saw some of the worst street violence in Paris in decades and blocked access to shopping malls around the country during the peak season for selling alcoholic drinks.

In 2018, spirits sales in French supermarkets fell 2.1 per cent in volume to 275 million litres and fell 1.34 per cent in value to €4.72 billion ($7.7 billion) compared to the year earlier, Reuters reports.

In contrast, spirits exports hit a record high of €4.3 billion in 2018, up 1.8 per cent on 2017, mainly boosted by cognac, liqueurs and rum sales. The volume exported stood at 445 millions litres, or 53 million 12-bottle boxes, up 1.9 per cent on the year.

Tesco eyes launch of premium stores

Tesco, Britain’s biggest retailer, says it is considering a trial of a premium convenience store under the “Tesco finest” banner to compete with upmarket food retailers such as Marks & Spencer.

The group hosted a capital markets day for analysts and investors last Tuesday at which it flagged an opportunity for stores with a 7 per cent operating margin – significantly ahead of the group-wide target of 3.5 to 4 per cent. 

Other initiatives discussed at the capital markets day included opportunities to sell more unique brands and online meal subscriptions, developing its Clubcard loyalty program with a subscription model, setting up mini fulfilment centres at the back of stores for online grocery, and delivery robots, Reuters reports.

The company also floated plans to open up to 750 new convenience stores in Thailand. There are currently 1583 Tesco stores in the country.

H&M spooks share market

Swedish fashion retailer H&M has reported sales growth for a fourth straight quarter, but also hinted it had needed to invest more to boost its online business. In response, its shares fell 1.8 per cent as investors perhaps focused on the higher spending.

H&M, the world’s second-biggest fashion retailer, has seen profits shrink and inventories rise in recent years as its core brand has not kept up with the online shift and tougher competition, and not reacted fast enough to demand swings, Reuters reports.

The full second-quarter earnings report will be released on June 27.

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