As many as 1,200 stores worldwide of the owner of the clothing brand Zara will be closed in an effort to provide a boost to the online sale of clothing amidst the chaos to its business because of the outbreak novel coronavirus pandemic.
Between 1,000 and 1,200 mainly smaller stores will be “absorbed” by it, said Inditex, the owners of Zara. Most of the stores that would be closed will be the older shops and mainly from brands other than Zara.
Bershka, Pull & Bear and Massimo Dutti are amng the other brands of the Spanish company.
The company also said that most of the closures will be focused in the company’s Asian and European businesses. Analysts said that about 107 stores of the company in the United Kingdom will most likely be significantly impacted.
The company will offer other roles and jobs such as in its dispatching of online purchases for those staff that will be affected and hence “headcount will remain stable”, Inditex said.
After the reorganisation of the company, the total number of stores of the company globally will fall from 7,412 to between 6,700 and 6,900 and that number will include the company opening up of 450 new stores.
The Covid-19 pandemic has hit Inditex, one of the largest clothing retailers of the world very hard. Between 1st February and 30th April, the first quarter of its financial year and when the pandemic hit the world, the company reported a drop in sale of 44 per cent to €3.3bn. During the quarter, the company reported a net loss of €409m as the company was forced to keep almost a quarter of its shops closed as of June 8 because of the pandemic.
However, Inditex said that some of the hit to sale at the physical stores was made up by an increase in the company’s online sales. The company reported a 50 per cent year on year growth in its online sales for the quarter while there was a 95 per cent year on year growth in the month of April.
The Covid-19 pandemic had forced retailing companies all over the world that are primarily dependent on their bricks and mortar stores to re-evaluate their business models because, according to analysts, it is expected that footfall at the physical stores will be low for quite some time in the future because of the pandemic and social distancing measures.
In the UK fashion brands Monsoon Accessorize and Quiz said on Wednesday they would close branches, with hundreds of jobs lost.
The pandemic has also hit the casual dining sector quite hard. The Restaurant Group has said that at least 125 physical stores of the company – mostly of Frankie & Benny’s and Garfunkel’s, will not be reopened even after the lockdown is over. That will put at risk about 3,000 jobs of the company. The Wagamama chain of the company will however remain unaffected.
The new business plan for Inditex entails the assumption of the company that more than 25 per cent of the revenues of the company will be accounted for by online sales 2022 which currently is at 14 per cent of its total sale as of 2019.
(Adapted from TheGuardian.com)