The Future of Zara Under New Leadership

Zara-owner Inditex, the world’s largest fashion retailer, appointed a mix of new and familiar faces to top management positions this week. The shakeup comes at a pivotal moment for the Spanish giant — known for its cheap and chic clothing and super-responsive supply chain — which is facing new competition and criticism.

Marta Ortega Perez, the youngest daughter of company founder Amancio Ortega, was named executive chairwoman in a “generational handover.” The 37-year-old will start in April, replacing Pablo Isla, a longtime Inditex executive who has been instrumental in growing the group, which also includes the brands Pull & Bear, Massimo Dutti and Bershka. Isla was appointed executive chairman in 2011 when Amancio Ortega stepped down, and also served as deputy chairman and chief executive for several years. He will exit the business in March.

Inditex also promoted Oscar García Maceiras, the company’s general counsel and secretary of the board, to CEO. A lawyer who just joined the company eight months ago, García Maceiras is replacing Carlos Crespo, who was only appointed CEO two years ago and is now transitioning into the role of chief operating officer.

Investors responded poorly to the news, sending shares plunging by 6 percent on Tuesday before a partial recovery later in the week. Spanish investment firm Alantra called the appointments “bad news,” noting that investors “expected a more orderly and smoother transition period, with Isla supervising in a non-executive role.” Investment bank Kepler Cheuvreux said the new leaders “have a lot to prove when it comes to their ability to run this big monster in the middle of the Covid crisis.” Inditex declined to comment.

The new appointments come at a particularly challenging time for Inditex.

Fast fashion brands are facing criticism from advocates, and increasingly consumers, about their labour practices and environmental impact. Sustainability activists are concerned about the throw-away culture fast fashion has cultivated, where young shoppers buy cheap clothes and toss them into landfills after one or two wears. The constant churn of products, with all its use of cotton, dyeing mills, and cheap labour is also causing harm. Inditex has taken strides towards sustainability, including a pledge to only use organic, recycled or sustainable materials by 2025, but hasn’t fully quieted the criticism of its business model.

Inditex has also come under fire for reportedly using forced Uighur labour, and is currently being investigated by French prosecutors, along with Uniqlo, SMCP and Skechers, over whether they’ve profited from the human rights violations of the Muslim minority group in China. This past week, France blocked the expansion of a Zara store in Bordeaux, citing the concerns it has about the brand’s ties to Uighur labour. Inditex has disputed the accusation.

Zara is also facing stiff competition from online competitors like Asos, Boohoo and Fashion Nova. Just as the Inditex megabrand has used its vast store network and data-driven supply chain to bring trends to consumers faster and more efficiently, these digital pure players have found ways to operate even more speedily and offer even lower price points.

And then there’s newcomer Shein, which uses sophisticated software to churn out trends by the thousands and can bring small batches of products to market in mere days. It was the most-purchased fast fashion brand in the US in the first six months of 2021, beating out Zara and H&M, according to credit card data pulled from Earnest Research.

Inditex has already taken steps to protect its business from its new rivals. It announced last year it would close up to 1,200 of its over 7,400 stores, build out its e-commerce offerings and better integrate its online and in-store channels, an initiative spearheaded by Isla.

But the Zara owner isn’t out of the woods yet. Shein is still growing rapidly, and new challengers are adopting that company’s methods. The rise of secondhand marketplaces like Poshmark and Thredup is also a challenge to fast fashion, allowing consumers to purchase pre-owned clothing from premium labels at relatively affordable prices.

Zara may find some advantage in sticking to its guns, at least aesthetically. The current crop of Gen Z fast-fashion labels chase trends, and don’t exactly have their own distinct design signatures. Zara, on the other hand, has developed a following because its marketing and product styles both have a point of view and feel more elevated than rivals. Many consumers view Zara as a “premium” fast fashion retailer and its look follows the glossy, minimalism that has long dominated fashion. More recent campaigns have included shoots from high fashion photographer Steven Meisel featuring models like Precious Lee.

The French art director Fabien Baron recently told WSJ. that Marta Ortega Perez is “the undercurrent voice” of Zara. She might not have decades of experience running a retail company, but she could help maintain the cool sensibility that has helped set Zara apart.

THE NEWS IN BRIEF

FASHION, BUSINESS AND THE ECONOMY

Report: Thai Central Group to acquire Selfridges. On Thursday, The Times reported that the billionaire Weston family had agreed to sell the British department store chain to Thailand’s largest retail conglomerate. Listed subsidiary Central Retail Corporation issued a statement denying its involvement, but leaving open the possibility that another entity associated with parent company Central Group will acquire the UK department store chain.

Prada sees secondhand fashion as opportunity, weighs partnerships. The luxury fashion brand thinks it can grow its presence in the $37.2 billion market both in-house and through partnerships, marketing chief and heir designate Lorenzo Bertelli told Reuters.

Balenciaga to launch metaverse business unit. The Kering-owned brand is creating a dedicated business unit to explore opportunities for marketing and commerce in the buzzy “metaverse,” chief executive Cédric Charbit said, speaking at BoF’s annual VOICES gathering.

Hermès to join Euro Stoxx 50, cementing ascent. The brand is set to join Europe’s main equity benchmarks, an inclusion that will further bolster the French luxury company’s visibility among investors and further its big-brand status.

Versace on pace to meet $2 billion mid-term revenue target sooner than expected. Capri Holdings Ltd. chief executive John D. Idol said he is optimistic about the outlook for the company’s brands — especially Versace. After the bullish comments, Capri looks more likely to beat its $7 billion mid-term revenue target, according to Bloomberg.

Elle to go fur-free. The fashion magazine will no longer promote fur in any of its 45 international editions, Elle senior vice president and editorial director Valéria Bessolo Llopiz announced Thursday at BoF VOICES.

Allbirds posts wider than expected quarterly loss on rising costs. The shoemaker saw revenue rise 33 percent to $62.71 million while its net loss widened to $13.80 million in the third quarter — its first set of results since its Nasdaq debut earlier this month.

Lululemon fires back at Peloton with its own patent lawsuit. The suit comes five days after the fitness bike company filed a pre-emptive suit against the clothing maker, as a dispute over a busted co-branding deal heats up.

Maison Kitsuné launches investment arm, backs Connor McKnight. The French fashion and lifestyle brand’s early-stage investment arm, Kitsuné Ventures, launched Nov. 29 and will invest in businesses across fashion, media, hospitality and technology, the company said.

Gucci family claim ‘House of Gucci’ inaccuracies. The family released a statement admonishing the new film, which stars Lady Gaga and depicts the Italian fashion dynasty’s decline, particularly its portrayal of members of the Gucci family.

Brazilian footwear giant Arezzo & Co acquires Carol Bassi. The 180 million reais ($32 million) acquisition of the high-end womenswear brand marks the second purchase of an apparel company for Arezzo and Co. in 2021. Carol Bassi expects to see revenue of $58 million reais ($10.2 million) this year.

THE BUSINESS OF BEAUTY

Edgewell buys razor brand Billie after P&G was blocked from buying it. The Schick and Banana Boat owner said it purchased the direct-to-consumer brand in a $310 million transaction.

India’s Nykaa looks to triple store count in retail expansion. The Indian cosmetics-to-fashion retailer plans to bring its brick-and-mortar presence to 300 stores, said founder and chief executive Falguni Nayar.

PEOPLE

Virgil Abloh honoured at Louis Vuitton runway show. A Miami runway show originally intended for Louis Vuitton’s top clients became a tribute to the late designer in the presence of his friends, collaborators and colleagues. The British Fashion Council’s annual awards gala on Monday in London also opened with a tribute to Abloh.

Kenya Hunt appointed editor-in-chief of Elle UK. The former Grazia deputy editor, who is the author of “Girl: Essays on Black Womanhood” will join the Hearst-owned publication beginning March 7, 2022.

VF Corp appoints president of global packs. Nina Flood, who has previously worked as president of Eastpak and Kipling North America, will helm the division, which includes Eastpak, JanSport and Kipling. She will be based at the VF International headquarters in Switzerland and report to Martino Scabbia Guerrini, executive vice president and president of Europe, the Middle East and Africa.

Neiman Marcus Group names interim management appointments. The Dallas-based luxury retailer has named Jim Scully interim chief growth officer and Mark Weinsten interim chief financial officer while it searches for a permanent chief financial officer.

MEDIA AND TECHNOLOGY

TikTok parent eyes Middle East e-commerce opportunity with logistics investment. ByteDance Ltd has invested in Dubai-based iMile Delivery as part of the first major fundraising by the courier start-up that services Chinese online vendors, people familiar with the matter told Bloomberg.

Compiled by Joan Kennedy.