Inditex, the parent company of Zara, continues to increase its stocks

“The United States is already our second largest market, and we see great growth opportunities in that market,” Inditex CEO Oscar Garcia Maceiras said on the earnings call. This week, Inditex founder Amancio Ortega announced plans to buy $905 million worth of warehouses in the United States, which are currently leased to Amazon and FedEx. Following this bullish outlook, the company increased its inventories by 43% in the first half of 2022, as it expects even higher demand towards the end of the year, according to Inditex’s earnings report.

Basic items like underwear and t-shirts, which Inditex sources from Asia, made up a large portion of the inventory. At the same time, Zara’s assortment has focused on creating higher-priced collections, especially in the fall, emphasizing evening dresses and suits. This fall, the retailer is launching two bespoke collections, featuring American designer Narciso Rodriguez and model and Zara ambassador Kate Moss.

“The fall/winter inventory is considered high quality and in line with strong sales trends from previous quarters and sales performance in the second half of 2022,” Inditex chief financial officer Ignacio Fernández said during the interview. the call.

Inditex described further supply chain investments as a “long-term” plan. The company said it expects to face continued manufacturing headwinds from its Asian factories.

Over the past two years, the company has implemented a system enabling in-store fulfillment, using its 7,000 Zara locations to fulfill local orders. Inditex has also implemented what it calls “local” materials supply and production hubs close to Europe, such as Morocco and Turkey. This move helped Zara manufacture and ship its seasonal merchandise within weeks.

The company is also in expansion mode when it comes to its physical footprint. Inditex opened new stores in 24 markets in the first half of 2022.

Gaurav Joshi, chief executive of global management consulting firm AArete, said Zara’s latest supply chain investments will help it better manage its omnichannel execution.

“By continuing to prepare for this upcoming surge in demand over the holiday season, Zara will be able to steadily increase inventory, ship products faster and avoid stock-outs at fulfillment centers. distribution serving major metropolitan areas,” Joshi explained.

As big-box retailers like Walmart and Target face excess inventory, Joshi said fast fashion doesn’t have the same barriers to moving products. “On the one hand, most fast fashion retailers have the ability to reduce overall operating costs year over year,” he said. Moreover, this type of fashionable clothing is offered to move quickly among Millennials and Gen Z customers, as well as customers who sell brands due to inflation, Joshi added.