Inditex, the world’s largest apparel retailer, changed its top management in a “generational handover” this week, sending shares lower as competition and criticism flare-up.
Inditex reshuffled its board of directors this week, a move that comes at a critical time for the Spanish conglomerate, which is facing greater competition and criticism.
The world’s largest apparel retailer, Inditex, which owns Zara, appointed a mix of fresh and familiar faces to top management roles this week. The reorganization comes at a critical time for the Spanish behemoth, which is recognized for its low-cost, high-fashion apparel and fast-response supply chain but is facing increasing competition and criticism.
In a “generational transition,” Marta Ortega Perez, the youngest daughter of firm founder Amancio Ortega, was named executive chairwoman. The 37-year-old will take over in April, succeeding Pablo Isla, a long-serving Inditex executive who was key in the company’s expansion, which includes brands like Pull & Bear, Massimo Dutti, and Bershka. When Amancio Ortega stepped down in 2011, Isla was named executive chairman, and he also served as deputy chairman and chief executive for several years. In March, he will leave the company.
Oscar Garca Maceiras, the company’s general lawyer and secretary of the board, was also promoted to CEO. Garca Maceiras, a lawyer who has only been with the company for eight months, succeeds Carlos Crespo, who was just appointed CEO two years ago and is now shifting to the job of the chief operating officer.
Investors reacted negatively to the news, sending shares down 6% on Tuesday before recovering partially later in the week. The nominations were deemed “poor news” by Spanish investment firm Alantra, which stated that investors “anticipated a more orderly and smoother transition phase, with Isla supervising in a non-executive role.” However, the new leaders “have a lot to prove when it comes to their capacity to handle this massive beast in the heart of the Covid crisis,” according to investment firm Kepler Cheuvreux. Inditex did not respond to a request for comment.
Inditex is facing a particularly difficult period due to the new appointments.
Advocates and, increasingly, consumers are criticizing fast fashion brands for their labor methods and environmental consequences. According to environmental groups, fast fashion has developed a throw-away culture in which young customers buy cheap items and discard them after one or two wears. The ceaseless churn of products, with all of its cotton, dyeing mills, and low-wage labor, is also harming the environment. Inditex has progressed toward sustainability, including a goal to utilize entirely organic, recycled, or sustainable materials by 2025, yet the company’s economic model continues to be criticized.
Inditex, along with Uniqlo, SMCP, and Skechers, has come under fire for allegedly using forced Uighur labor and is currently being examined by French authorities to see if they benefitted from the Muslim minority group’s human rights breaches in China. In addition, France rejected the expansion of a Zara store in Bordeaux earlier this week, citing worries over the brand’s ties to Uighur labor. Inditex has refuted the charge.
Zara also has to contend with online competitors such as Asos, Boohoo, and Fashion Nova. These digital pure players have discovered methods to operate even more quickly and at even lower price points, much as the Inditex megabrand has utilized its massive retail network and data-driven supply chain to bring trends to consumers faster and more efficiently.
Then there’s Shein, a relative newcomer that employs sophisticated software to churn out thousands of trends every day and can get tiny batches of products to market in days. According to credit card data from Earnest Research, it was the most-purchased fast fashion brand in the United States in the first half of 2021, topping out Zara and H&M.
Inditex has already taken steps to safeguard its company from new competitors. For example, it said last year that it would close up to 1,200 of its approximately 7,400 locations, expand its e-commerce services, and better connect its online and in-store channels, thanks to Isla’s initiative.
On the other hand, the Zara owner isn’t out of the woods yet. Shein’s business is still booming, and new adversaries follow in its footsteps. Fast fashion is also being challenged by the growth of secondhand marketplaces such as Poshmark and Thredup, which allow customers to buy pre-owned items from high-end brands at reasonable costs.
Zara might benefit from sticking to its guns, at least in terms of appearance. The latest crop of Gen Z fast-fashion labels follow trends rather than developing their own distinctive design characteristics. On the other hand, Zara has a cult following since its marketing and product styles are more elevated and have a point of view than competitors. Zara is widely regarded as a “luxury” quick fashion company, and its aesthetic is based on the glossy, minimalist aesthetic that has long dominated fashion. Models like Precious Lee have appeared in recent campaigns shot by high fashion photographer Steven Meisel.
According to Fabien Baron, Marta Ortega Perez is “the undercurrent voice” of Zara, a French art director. She may not have decades of expertise leading a retail business, but she may contribute to maintaining Zara’s stylish sensibility.
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