Zara UK sales up but profits fall, chain still hailed as 'winner' in tough market

By

Sandra Halliday

Published
Oct 21, 2019

Inditex’s Zara chain has seen its profits falling in the UK even though its sales there have continued to rise. Its full-year 2018/19 sales rose to £772.5 million from £704.8 million but profits were dented as selling and distribution costs rose 7%. Pre-tax profits more than halved to £22.3 million from £51.8 million.

That said, despite the big increase in costs, the company remains committed to opening new UK spaces as and when opportunities arise. 

And analysts said that Zara remains “a winner” on the UK high street with its performance being impressive given the troubled state of the UK fashion retail market at present.

Inditex’s UK sales overall rose by £87.8 million to £929.6 million for the year and its operating profit was £26 million as the operating margin fell to 2.8% from 6.6%.

Those figures certainly show how big a contribution Zara makes to total Inditex turnover in Britain.

Chloe Collins, Senior Retail Analyst at GlobalData, said: “Zara, which accounted for 83.1% of group FY2018/19 UK sales, continues to be one of the few winners within the UK fashion market, particularly among under 35s, who make up 52.9% of its clothing shoppers. Its 2019, UK clothing market share is forecast at 2%, thanks to its compelling product offer of trend-led fashion, quality and affordable prices, with a polka dot midi dress from its SS19 range even gaining its own Instagram account. 

“Zara is able to quickly react to sales through the group’s ownership of its supply chain, meaning it can better serve consumer demand, which puts it in a strong position to compete with other fast fashion players such as the Boohoo Group, H&M and Asos. However, to avoid coming under scrutiny by eco-conscious consumers, Zara must better showcase its environmental initiatives and as it works towards its pledge of ranges becoming 100% sustainable by 2025, it should highlight sustainable products clearly in stores and online to educate shoppers.”

But Collins said Zara isn’t the only Inditex business increasing its sales in Britain with Stradivarius having seen the strongest revenue growth of all the brands at 38.8%, driven by two new store openings within the period. But she added the “the brand remained loss-making, leaving its place within the market under question.”