Haze Continued Zara UK Fiscal 2019 Pre Tax Profit Plunged 56%

The fast fashion industry is encountering the dangerous situation of "Waterloo".

A few days ago, the Inditex group of Zara, the fast fashion giant, released the British market earnings data, showing that the annual sales volume of the British market group was 929 million 600 thousand pounds, an increase of 10% over the same period last year, operating profit of 26 million pounds, an increase of 2.8% compared with the same period last year, while the operating profit margin of the previous year was 6.6%.

Inditex group's core brand Zara sales in the UK market reached 772 million 500 thousand pounds, an increase of 9% over the previous year, and the pre tax operating profit reached 22 million 300 thousand pounds, down 56% from the same period last year. For profit decline, Inditex group said it was mainly affected by a 7% increase in distribution costs.

The slowing down of the growth rate continued to revolve around the Inditex group. Just last month, Inditex group released the first half of 2019 performance data, as of July 31st sales reached 12 billion 820 million euros, an increase of 7% over the same period, net profit increased 10% to 1 billion 550 million euros. But the Inditex group's gross profit margin in the first half of this year was lower than analysts' expectations, up 0.1 percentage points from last year to 56.8%.

Inditex group's main brand Zara has frequently appeared in China. In the past two months, Zara has been closed continuously in two stores in Beijing's core business circle, namely Dongzhimen Raffles shop and new Dongan store in Dongzhimen, for unknown reasons. Although I do not know the specific reasons for closing the store, I can hardly do without the relationship between performance and performance. Earlier data showed that Zara will close 250 stores in 2019 to reduce the number of stores to ensure its growth.

In fact, not only in the Chinese market closed down, Zara in September last year, Zara put New York's first store on the road to closure, when the news release shocked the fast fashion circle. The decline in performance over the years is telling that the golden age of Zara has passed.

The decline of Inditex group's performance from the 2015 fiscal year shows that the annual profit in the 2015 fiscal year has increased by 14.9%, the net profit in fiscal 2016 has increased by 10%, the 2017 fiscal year has increased by 6.7%, while the 2018 fiscal year has only 2%. The slow growth of sustained performance has forced Inditex group to face the difficulties of the retail environment. In order to improve its performance, Inditex group has made many moves to expand the layout of online channels, improve store image, set up flash shop, cross border beauty industry and other aspects, and get good results.

In the first quarter of fiscal year 2019, group Inditex sales increased by 5% to 5 billion 927 million euros, and net profit increased 10% to 734 million euros.

According to the analysis of the decline in operating profits in the UK market, Zara is still the winner of the British fashion retail market, with the brand sales accounted for 83.1% of the group's 2019 fiscal year, due to the poor retail environment in the UK and the fact that the profits of the UK have fallen by more than 50%.

The fast fashion industry is facing a difficult stage of development. The traditional fast fashion brands have lost the market under the influence of the retail environment. Discount, clearance, closing, bankruptcy, and withdrawal from the international market have appeared in news reports. Not long ago, the news that fast fashion brand Forever21 filed for bankruptcy caused a sigh of regret in the fast fashion circle. In fact, more than Forever21, and New Look, Topshop, J.Crew and other brands continued to be suppressed, performance showed a weak state of development.

During the cold winter of retail, consumers' demands and aesthetic standards have raised higher requirements, and whether fast fashion brands can win the new consumers' market and how to win have become a problem worthy of further study.

Whether the Inditex group can continue the myth of fast fashion is still unknown.