In the background, Inditex heiress sets tone for Zara revamp
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[March 31, 2023] By
Corina Pons and Helen Reid
MADRID (Reuters) - A year into chairing the world's biggest fashion
retailer, Marta Ortega is trying to shake up Zara owner Inditex's
fast-fashion image and draw in more aspirational shoppers, according to
analysts and investors.
That strategy has already helped Inditex grow sales and profits as the
retailer passed on higher costs to consumers through price increases.
Inditex completed a leadership reboot and generational handover when
Ortega, the youngest child of founder Amancio Ortega, became
non-executive chair on April 1 last year, just a few months after Oscar
Maceiras took over as CEO.
Amancio Ortega set up the first Zara store in A Coruna in the north west
of Spain in 1975. The group now includes seven brands, including
Pull&Bear and Bershka, but flagship Zara accounts for 73% of sales.
Marta Ortega started from the bottom at Inditex, stacking shelves at a
Bershka store when she was 23.
Her appointment was initially met with scepticism, but since the
39-year-old started in the role, Inditex shares have risen around 50%
and the company reported its strongest ever year of sales in 2022.
Like other publicly listed family-owned companies, Inditex must strike a
balance between the family's interests and a robust corporate governance
structure that shareholders can trust.
Inditex's leadership transition has gone smoothly thanks to the Ortega
family entrusting the day-to-day running of the company to professional
executives, according to Josep Tapies, professor at IESE Business School
in Spain. But some shareholders would like more insight into Ortega's
thinking as chair.
"As an investor, we'd never get to meet Marta, which I think is a pity,"
said Ann Steele, portfolio manager at Columbia Threadneedle.
"We hear a lot that she's interested in the growth of online, in
stretching the brand, but we don't get the opportunity to sit down with
her and discuss that."
Maceiras, a lawyer who was formerly general counsel at Inditex, told
reporters his relationship with Ortega was "fluid and trusting".
Ortega, whose father owns 59.3% of Inditex, has mainly worked in the
background, leaving the spotlight to the CEO. An Inditex spokesperson
said that she has focused on "defining Zara's brand and product
strategy". Ortega declined a request for an interview.
A source close to the company said Ortega has been "central" in
accelerating Inditex's "high-fashion" strategy over the past year.
"We feel that Marta Ortega has repositioned Zara slightly upwards," said
Patricia Cifuentes, analyst at the investment banking arm of Spanish
investment firm Bestinver.
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Inditex holds its first general meeting
of shareholders with Marta Ortega, daughter of the firm's founder,
Amancio Ortega, as head of the textile multinational, in A Coruna,
Spain July 12, 2022. REUTERS/Miguel Vidal/File Photo
"Reinforcing that Zara sells fashion, not just clothes, has allowed
Inditex to increase prices and protect the margins amidst the
inflationary storm."
As price-sensitive shoppers were squeezed by inflation, Inditex has
targeted the well-heeled, raising prices and investing more into
flagship stores in prime locations, such as Paris' Rue de Rivoli
while shutting smaller stores.
This year it plans to replace hard security tags with RFID tags sewn
into garments, a shift that will cut self-checkout times and reduce
queues and crowds in stores.
The strategy has paid off. Some investors say gambles like that are
more easily made when families, with one eye on their legacy, are
involved.
"The importance of the family is that it ingrains a long-term
mindset in the business," said Alistair Wittet, portfolio manager at
Comgest in Paris, which holds Inditex shares.
"That frees up management to not worry about having to deliver very
short-term results at the expense of long-term decisions."
Maceiras has refused to say whether Inditex will hike prices further
this year. In a reply to Reuters' questions, Inditex said it is
focused on "the highest quality at affordable and stable prices".
Ortega hinted at her ambitions for the company in Inditex's 2022
annual report, writing: "We don't want to be fast; we want to be
agile and flexible." That is a departure for the company seen as a
fast-fashion pioneer and known for getting new styles into stores at
high speed.
Ortega's personal projects also dovetail with Inditex's attempt to
be seen as more upscale. Last year, she created an art and fashion
foundation with an exhibition space in her home town of A Coruna,
where Inditex has its headquarters.
The MOP Foundation, after her initials, in November opened an
exhibition of photos by renowned fashion photographer Steven Meisel.
Meisel, whom Ortega knows personally, has shot 13 campaigns for Zara
since 2017, in a departure from his usual roster of luxury clients
including Dolce & Gabbana and Versace.
(Reporting by Corina Pons in Madrid and Helen Reid in London;
Editing by Sharon Singleton)
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