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ZARA: Fast Fashion
Harvard Business School Case #703-497
Case Software #XLS-315
Copyright © 2011 President and Fellows of Harvard College. No part of this product may be reproduced, stored in a retrieval system or transmitted in any form or by any means—electronic, mechanical, photocopying, recording or otherwise—without the permission of Harvard Business School.

Exhibit 2

Exhibit 2 Average Labor Costs and Productivity in Apparel ($/hour, 1998)
Labor Cost Value Added
EU Countries
Germany 18 23
Spain 7 11
Italy 14 20
Portugal 4 6
UK 11 13
Major Suppliers
Turkey 2 12
China 0.4 na
India 0.4 2
Egypt 0.7 2
Other Major Markets
US 10 20
Japan 14 na
Source: Casewriter compilation of data from: Werner Stengg, "The Textile and Clothing Industry in the EU," Enterprise Papers No. 2, June 2001; and http://europa.eu.int/comm/enterprise/textiles/statistics.htm, accessed December 17, 2002.

Exhibit 3

Exhibit 3 Landed Costs of a Large Men's Shirt in Spain: Illustrative
Manufactured in Spain Manufactured in Asia
Fabric Costs € 17.20 € 25.32 Purchasing costs
Other input costs € 13.25 € 1.49 Transportation costs
Labor Costs € 11.79 € 2.28 Rehandling costs
Total € 42.24 € 29.09 Total
Source: Confidential industry sources.

Exhibit 6

Exhibit 6 Key Competitors and Inditex, 2001
Gap H&M Benetton Inditex
Operating Results (€ Millions)
Net Operating Revenues 15,559 4,269 2,098 3,250
Cost of Goods Sold 10,904 2,064 1,189 1,563
Gross Margin 4,656 2,204 909 1,687
Operating Expenses 4,276 1,615 624 982
Operating Profits 379 589 286 704
Non-operating Expenses 108 -28 43 209
Pre-tax Income 272 617 243 495
Income Tax 280 206 92 150
Minority Interests 0 0 2 5
Net Income -9 410* 148 340
Financial Position (€ Millions,
except where noted otherwise)
Current Assets 3,436 1,468 1,558 854
Property, Plant, and Equipment 4,695 661 720 1,228
Other Noncurrent Assets 435 54 543 523
Total Assets 8,566 2,183 2,821 2,605
Current Liabilities 2,320 432 956 834
Noncurrent Liabilities 2,850 101 625 285
Total Liabilities 5,170 532* 1,580 1,119
Equity--Book Value 3,396 1,650 1,241 1,486
Equity--Market Valuea 12,687 15,564 2,605 13,433
One Year Change in Market Value (%)b -60% 8% -20% 47%
Other Statistics
Employees 166,000 22,944 6,672 26,724
Number of Countries of Operation 6 14 120 39
Sales in Home Country (%) 87% 12% 44% 46%
Sales in Home Continent (%) NA 96% 78% 77%
Number of Store Locationsc 3,097 771 5,456 1,284
Stores in Home country (%) 87% 15% 40% 60%
Stores in Home Continent (%) 92% 96% 80% 86%
Average Store Size (sq. meter) 632 1,201 279 514
Sources: Compiled from annual reports; analyst reports; Bloomberg; Standard & Poor's Compustat® data via Research InsightSM; J. P. Morgan, "Hennes & Mauritz," company report, February 10, 1999, p. 89, Compustat.
* Totals off due to rounding.
aOn May 22, 2002.
bIn-home currency.
cIncludes franchised stores.

Exhibit 7

Exhibit 7 Inditex Historical Financials (millions of euros)
Year 2001 2000 1999 1998 1997 1996
Net Operating Revenues 3,249.8 2,614.7 2,035.1 1,614.7 1,217.4 1,008.5
Cost of Goods Sold 1,563.1 1,277.0 988.4 799.9 618.3 521.0
Gross Margin 1,686.7 1,337.7 1,046.7 814.8 599.1 487.5
Operating Expenses 982.3 816.2 636.2 489.2 345.5 285.4
Operating Profits 704.4 521.5 410.5 325.6 253.6 202.1
Non-Operating Expenses 209.3 152.7 118.1 96.7
Pre-Tax Income 495.1 368.8 292.4 228.9
Income Tax 149.9 106.9 86.2 76.1
Minority Interest 4.8 2.7 1.5 -0.2
Net Income 340.4 259.2 204.7 153 117.4 72.7
Net Margin 10.47% 9.91% 10.06% 9.48% 9.64% 7.21%
Inventories 353.8 245.1 188.5 157.7
Accounts Receivable 184.2 145.2 121.6 75
Cash and Cash Equivalents 315.7 210 171.8 158.8
Total Current Assets 853.7 600.3 481.9 391.5 274.0 190.3
Property, Plant, and Equipment 1,336.8 1,339.5 1,127.4 880.4 635.7
Other Non Current Assets 414.5 167.8 163.6 54.4 67.5
Total Assets 2,605 2,107.60 1,772.9 1,326.3 977.2 820.3
Asset Turnover 1.25 1.24 1.15 1.2 1.2 1.2
ROA 13.07% 12.30% 11.54% 11.54% 12.01% 8.86%
Accounts Payable 426.3 323.0 276.1 215.6 131.4
Other Current Liabilities 407.9 347.3 275.6 229.1 141.5
Total Current Liabilities 834.2 670.3 551.7 444.7 272.9 234.1
Non Current Liabilities 284.5 1,437.7 1,221.3 881.6 704.3 586.2
Total Liabilities 1,118.7 2,108 1,773 1,326.3 977.2 820.3
Equity 1,486.20 1,170.9 893.2 673.4 529.9 414.9
Leverage 1.75 1.80 1.98 1.97 1.84 1.98
ROE 22.9% 22.1% 22.9% 22.7% 25.0% 20.0%
Source: Inditex.

Exhibit 8

Exhibit 8 Inditex Timeline
Year No. of Stores Event
1963 ● Establishment of Confecciones Gao, S.A. Beginning of the company's activities
1975 2 ● Opening of 1st Zara store in La Coruña
1976 2 ● Establishment of Goasam as the owner of the Zara chain stores
● Purchase of 1st computer
1985 37 ● Reorganization of group structure with Inditex at the apex
1988 71 ● Formation of Zara B. V. in the Netherlands as holding company for international activities
1989 88 ● International rollout begins with opening of a Zara store in Portugal
1990 105 ● Opening of fully automated 130,000-square-meter central warehouse
● Joint venture with Toyota (Japan) introduces just-in-time system at one of the factories
1991 218 ● Establishment of commercial office in Bejing to handle purchase of supplies in Asia
● Diversification into new segments
● Acquisition of 65% of Massimo Dutti
● Implementation of telecommunications system between headquarters and the supply, production, and sales centers
● Launch of the Pull & Bear chain
1993 369 ● Preparation/implementation of expansion plan for Zara in the French market
1995 508 ● Acquisition of all of the share capital of Massimo Dutti
1996 541 ● Expansion of central warehouse to cope with the increase in the number of points of sale
1998 748 ● Creation of the Amancio Ortega Foundation
● Alliance with Otto Versand to enter the German market
● Launch of the Bershka chain, targeting the younger female market
1999 922 ● Acquisition of Stradivarius makes it the fifth chain of the Group
2000 1,080 ● Opening of new Inditex headquarters complex in Arteixo, near La Coruña
2001 1,284 ● Initial public offering of 26% of Inditex's shares
● Launch of the Oysho lingerie chain
2002 ● Alliance with Percassi results in opening of first Italian store
Source: Inditex.

Exhibit 14

Exhibit 14 Globalization of Inditex
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Zara Stores Only (2001)
Europe
Spain 57 70 85 99 201 266 323 350 391 399 433 489 603 692 769 225
Portugal 1 2 4 11 17 28 38 49 60 74 87 97 104 140 38
France 1 3 5 13 20 30 36 47 55 59 64 68 67
Greece 1 6 8 10 14 17 17 19 29 20
Belgium 4 8 11 13 17 20 21 28 14
Sweden 1 3 3 4 6 6 5 3 0
Malta 1 1 1 1 2 2 2 0
Cyprus 1 2 4 5 8 9 2
Norway 1 1 1 1 1 0
Great Britain 1 3 7 11 11
Germany 2 7 17 15
Netherlands 2 2 6 3
Poland 2 2 2 2
Andorra 1 2 1
Austria 3 3 3
Denmark 1 2 2
Czech Rep. 1 1
Iceland 1 1
Ireland 2 0
Italy 3 0
Luxembourg 2 1
Subtotal 57 71 87 104 215 288 365 419 490 521 589 678 819 939 1101 406
Americas
United States 1 1 3 3 3 4 6 6 7 7 6 6 8 8
Mexico 1 1 7 12 14 20 25 29 41 55 27
Argentina 4 8 8 8 8
Venezuela 1 3 4 20 7
Canada 1 3 4 4
Chile 2 2 3 3
Brazil 3 5 7 7
Uruguay 2 2 2 2
Subtotal 0 0 1 1 3 4 4 11 18 20 27 37 54 71 107 66
Middle East/Asia
Israel 6 16 22 23 24 9
Lebanon 1 3 4 4 2
Turkey 3 3 4 5 5
Kuwait 1 2 4 4 2
United Arab Emirates 1 3 5 15 4
China 1 1 0 0 0
Japan 10 11 17 5 5
Saudi Arabia 3 11 14 6
Bahrain 1 1 2 1
Qatar 1 2 1
Jordan 1 0
Subtotal 0 0 0 0 0 0 0 0 0 0 6 33 49 70 76 35
TOTAL 57 71 88 105 218 292 369 430 508 541 622 748 922 1080 1284 507
Source: Inditex.

Exhibit 15

Exhibit 15 The Price of a T-shirt at Zara
Country Relative Price Level
Spain 100%
United Kingdom 151%
Denmark 153%
Poland 158%
Cyprus 136%
Lebanon 152%
Kuwait 171%
Saudi Arabia 170%
Bahrain 170%
Qatar 160%
Canada 178%
USA 209%
Mexico 164%
Venezuela 147%
Japan 231%
Source: Inditex.

Exhibit 17

Exhibit 17 European Markets for Apparel, 1999
Total Sales (€ billion) Apparel Outlets per Million Inhabitants Specialist Share of Apparel Sales (%) Specialist Sales (€/sq. meter) Total GNP (€ billion) Population (million) GNP per Capita (€) Distance from Spain (km)
Austria 8 416 40 2,500 229 8 28,280 1,809
Belgium 8 845 50 3,500 283 10 27,489 1,314
Denmark 4 702 25 3,100 192 5 36,183 2,072
Finland 3 493 33 2,100 145 5 27,822 2,949
France 41 640 56 3,400 1,603 59 27,217 1,053
Germany 61 725 69 4,500 2,308 82 28,073 1,870
Greece 8 1,416 36 1,700 142 11 13,357 2,366
Ireland 3 934 30 2,500 98 4 25,708 1,458
Italy 63 1,725 70 5,600 1,295 58 22,435 1,377
Netherlands 11 1,049 64 4,000 449 16 28,234 1,480
Poland 906 182 39 4,700 2,289
Portugal 5 25 1,900 124 10 12,412 503
Spain 25 1,599 57 3,100 662 40 16,756
Sweden 6 76 4,000 307 9 34,461 2,592
Switzerland 7 800 39 1,400 307 7 42,631 1,148
United Kingdom 55 560 67 5,600 1,641 60 27,492 1,263
Total 308 9,965 422
Average 21 915 49 3,260 623 26 25,203 1,703
Source: Compiled from Verdict, Retail Intelligence, and UBS Warburg estimates.