Spain’s Inditex, the owner of Zara fashion brand, saw the brand’s net profit surge more than 70% in India in 2017-18, even as the world’s largest fashion group grew at one of its slowest rates in the country amid increasing competition from global rivals.
Inditex operates in India through two joint ventures with Trent, the Tata Group’s retail arm, one for Zara and another for bridge-to-luxury label Massimo Dutti. Zara and Massimo Dutti collectively saw 20% revenue growth in India during the year. While the flagship Zara posted 73% growth in net profit to Rs 82.59 from Rs 47.6 crore a year ago, Inditex’s overall profits in the country were eroded by a net loss of Rs 2.73 crore that Massimo Dutti suffered during the year.
Inditex Trent, which runs 20 of Zara stores in India, saw its revenue increase 19% to Rs 1,221.67 crore in 2017-18 from Rs 1,023 crore in the previous year, according to Trent’s annual report released on Thursday. The other joint venture that operates three Massimo Dutti stores reported revenue of Rs 45.75 crore for 2017-18, up from Rs 30 crore a year ago.
Zara has been a success in India since its arrival in the country in 2010. According to market watchers it has been going strong despite competition from its global rivals including Sweden’s Hennes & Mauritz (H&M). While Zara has opened 20 outlets in India, H&M has been more aggressive in store expansions, opening a store a month on average since its entry in the country in 2015 and taking the tally to 32 outlets till May this year.
H&M, the world’s second-largest clothing firm, plans to open 50 stores in India by 2020 with an investment of Rs 700 crore. H&M’s sales in India in the six months to May went up 19% to Rs 535 crore from Rs 450 crore a year ago, according to the financial report on its website, helped by addition of new stores as well as merchandise priced lower than that of most rivals.
Each store generated annual sales of Rs 33 crore on average, making H&M’s performance among the best in the apparel segment in the retail market, but it paled in comparison to Zara’s almost double sales of Rs 61crore with its 20 outlets.
Market watchers say that Zara, H&M and other global firms have just touched the tip of the iceberg of the gigantic fashion apparel market in India. According to estimates by retail consultancy firm Wazir Advisors, India’s addressable market for apparel and clothing is about Rs 4 lakh crore and that is growing about 12% year-on-year. Out of that onethird of the business is for branded apparels that is growing 15% annually.
