Heiress takes charge of Zara amid war and pandemic

​The next April 1st marks the change of command of one of the global clothing giants: Inditex, owner of Zara, is once again guided by a member of the founding family. Enter Marta Ortega, 38, the youngest daughter of Zara creator Amancio Ortega. Leaves Pablo Isla, 58, the executive who has been at the helm of the company for the past 11 years, a period in which Inditex’s market value jumped six times, to around 71 billion euros.

The market was apprehensive about the change of control, announced on November 30 of last year. In that trading session, Inditex shares on the Madrid Stock Exchange dropped more than 6%. From the announcement until the last day 4, the company’s shares accumulated a loss of 27% – a period in which the General Index of the Madrid Stock Exchange fell 6.2%.

The big question is whether Marta Ortega, who has worked at the company for 15 years, but occupies a discreet position, will manage to lead the group, which has gone through two winning administrations: that of her father, Amancio Ortega (who today, at 85 years, dedicates himself more to the real estate market, through the Pontegadea family office), and Pablo Isla, who has twice led the Harvard Business Review ranking of the best executives in the world.

The challenge is even greater right now. Although the company managed, during the pandemic, to redirect sales from physical stores to the online channel, with the war between Russia and Ukraine, sales in Eastern Europe are compromised. The region is significant for the company: in all, the group has 502 stores in Russia alone. In Poland, the main destination for refugees in the conflict, Inditex has 233 outlets, almost as many as in France, where it has 270 stores.

This Saturday (5), the company sent a statement to the Spanish Securities and Exchange Commission (CVM), informing the suspension of its operations in Russia. “Inditex announces that, under the current circumstances, it cannot guarantee the continuity of operations and commercial conditions in the Russian Federation and that the group is temporarily pausing its operations in the 502 stores (of which 86 are Zara) and online in the country.”

According to the company, Russia accounts for about 8.5% of the group’s operating profit (Ebit) worldwide. In the country, it employs more than 9 thousand people, to whom it promises to “develop a special support plan from now on.”

Group has more stores in Ukraine than in Brazil

In Eastern Europe, Inditex’s main brand is not Zara, but Bershka, for youth fashion, in addition to Stradivarius, for women’s fashion. A message on Zara’s Ukraine page, where Inditex has 79 stores, reads: “Due to the current situation, online shopping will be temporarily unavailable and stores will remain closed. The return period will be extended to 30 days after stores open.” “.

To get an idea of ​​the importance of Eastern Europe, in Brazil, there are only 54 points of sale – 46 Zara and eight Zara Home.

The restricted presence makes the company much less expressive in the country than the big ones of national clothing: the Brazilians Renner (635 stores, being 104 Youcom and 119 Camicado) and Riachuelo (358 points of sale, being 25 Carter’s and 6 Casa Riachuelo), and the Anglo-Dutch C&A (308 stores). At the beginning of last year, the company announced the closing of seven stores in the country, in an adaptation to online sales.

In Brazil, Zara has positioned itself as a brand for the upper middle class. Not necessarily due to the product mix, but due to import costs, which put the prices of clothes, shoes and accessories a step above those practiced by rivals C&A, Renner and Riachuelo.

In the opinion of retail consultant Alberto Serrentino, from Varese Retail, Zara had more ambitious plans when it arrived in Brazil, in 1999. At the time, the goal was to reach 100 stores in three years. “But with the obstacles of the Brazil cost, the tax complexity, in addition to the competitive environment, expansion was limited”, he says.

“When they went to adjust the import cost to the timing of the collections, the price ended up being above those charged by other competitors, which made Zara turn to class A in Brazil”, he says. “They don’t have much room to grow, taking into account the Brazilian demographic pyramid”, says Serrentino who, however, considers the business “well-positioned” in the country.

For Eugênio Foganholo, from Mixxer Desenvolvimento Empresarial, the fiscal cost in Brazil discouraged the group from bringing other brands aimed at a young audience, such as Bershka itself, or Pull&Bear and Stradivarius. This did not happen in other Latin American markets: in Mexico, for example, Inditex has 409 stores under eight different banners, including 84 Zara outlets. Even in Colombia the group has more stores than in Brazil: 61.

“They restricted their operations in the country to the brands Zara and Zara Home, they did not become relevant in the Brazilian textile market”, says Foganholo. “It’s a different performance from other countries, where they offer more accessible fashion and with greater product turnover, which are their strengths”, he says.

The group produces, worldwide, up to 65,000 new collections a year, and has an incredible logistical organization, which delivers the latest clothes to its stores at least twice a week.

In the pandemic, Inditex increased its online sales, thanks to the integration of its network of 6,600 stores with a complex parts tracking system and the adoption of a single technological platform.

The tracking technology, known as radio frequency identification, or RFID, consists of miniature circuitry hidden in clothing security tags. By tracking the location of all its goods until they reach the customers, Inditex makes the stores function like mini distribution centers, from where online orders can be shipped.

“The company is very professionalized, they are the biggest fashion retailer in the world”, says Alberto Serrentino. “It is always very good when a company manages to complete succession processes that preserve the family culture and its origin”, says the specialist, about the succession in charge of the group.

INDITEX’S GLOBAL BRANDS

Source: Inditex/data as of 10/31/21

But the moment demands attention. Last year, a ranking by the Brand Finance consultancy with the 50 largest clothing brands in the world pointed to Zara in sixth place, after Nike, Gucci, Louis Vuitton, Adidas and Chanel – in 2019, however, the Spanish brand occupied second place. position in the list.

A more recent report by Brand Finance, with the 500 most valuable brands in the world in 2022, put Zara in 151st place, down 11 spots from last year. The name is currently worth US$ 12.99 billion and, among the most valuable Spanish brands, it is only behind Santander, in 128th position in the global ranking.

On April 1, Marta Ortega will not accumulate the positions of executive chairman and chairman of the board as Pablo Isla has done since 2011. In a new governance structure, which the company claims is closer to an “Anglo-Saxon” model, lawyer Óscar García Maeiras took over in November as the group’s chief executive (CEO), while Marta will be chairman of the board. Maeiras has been with Inditex for a year and, before becoming CEO, he was a member and secretary of the board of directors.

In Brazil, Zara stores were the scene of accusations of racism

Amancio Ortega’s youngest daughter works on the image of the Zara brand. It is precisely in this area that the retailer faces problems in Brazil. In the second half of last year alone, there were three complaints of racism made by consumers, against teams from the brand’s stores in Salvador and Fortaleza.

The most recent and noisy case concerns a black professor who was removed from the bathroom at Shopping da Bahia, in Salvador, at the end of December, after being accused of stealing a backpack that he himself had bought moments earlier at Zara. A security guard went after Luís Fernandes Júnior in the mall’s bathroom, accusing him of theft.

A store of the brand in Fortaleza, in turn, was accused of using the sound warning “Zara zeroed” to indicate the presence of black people or people with simple clothes who should be removed from the store. One of these approaches took place with a black delegate in September. In all cases, the company regretted the episodes in a statement and said at the time that they “do not reflect the company’s values”.

It is not only in Brazil that Zara collects controversies. In May of last year, the Mexican Ministry of Culture accused the brand of plagiarizing indigenous patterns in its new collection. In a letter, the government asked the Spanish multinational to explain why “a collective property”, identified in several Oaxácan communities, was “privatized” and what kind of remunerated benefit would be directed to creative communities.

THE sheet contacted Inditex, requesting an interview with Marta Ortega – to talk about the new challenges ahead of the position, trends in the fashion market (more digital and less ‘fast fashion’, concerned with sustainability), as well as a position on denunciations of racism in the group’s stores in Brazil. At first, the group’s press office said that the businesswoman would respond by email. The company later refused to respond to the report.

Founder bought gold building in Canada for 843 million euros

The Ortegas tend to be averse to the press. In August of last year, before her appointment as president of Inditex, Marta Ortega surprised her by granting an interview to the Wall Street Journal. In it, the businesswoman, born in Vigo, on the northwest coast of Spain, on January 10, 1984, said: “I think it’s important to build bridges between haute couture and street fashion, between the past and the present, between technology and fashion, between art and functionality”.

Marta is not as discreet as her father: she likes to participate in fashion shows and is a regular on the French and Italian rivieras. She studied business at the European Business School in London and completed her BA in Switzerland. She likes horses and has participated in equestrian competitions.

She is the third daughter of Amancio. When Marta was born, the founder of Zara was still married to his first wife, Rosalía Mera, who helped him start the clothing business that gave birth to Inditex. According to a biography of Rosalía, until Marta’s birth, she was unaware of her husband’s relationship with Flora Pérez – mother of Marta and Amancio’s middle son Marcos.

Rosalía died in 2013 and left her fortune to her only daughter with Amancio, Sandra, which made her at the time the second richest person in Spain, behind her father. Neither Sandra nor Marcos, however, hold any position at Inditex, which has about 60% of the shares in the founder’s hands.

Despite all his discretion, Amancio Ortega – who refused to pose for photographs until shortly before the group went public on the Madrid Stock Exchange – took an unusual initiative last year: he bought a gold-clad building in Toronto for 843 millions of euros. The Royal Bank Plaza, considered one of the most important office buildings in Canada, boasts in its two triangular towers layers of 24-karat gold in its 14,000 windows.

According to analysts, this is not about exhibitionism, but about a market opportunity. It’s a sign that the office rental industry may be on the mend.

INDITEX X-RAY

Foundation – 1963

Thirst – Arteixo, Spain

Employees – 144 thousand

Revenues – €19.33 billion *

Profit – €2.5 billion*

Presence – 6,654 stores, in 96 countries

Providers – 1,805, through 8,543 factories

*in the accumulated period of nine months, ended on 10/31/21