Since its first store in the US in 1989, Inditex, the parent company of Zara, Pull&Bear, and Bershka, has been cautious in expanding its presence in the region. It currently has only 101 Zaras in the US, which is less than 2% of the chain’s total 5,800 stores worldwide.
However, Inditex’s CEO Óscar García is now looking to accelerate its expansion by opening 30 new “projects” in the country over the next two years, including new stores, relocations, and expansions in cities such as New York, Boston, Charlotte, Los Angeles, Las Vegas, and Dallas.
García sees strong growth opportunities in the US market, despite the fact that for every $100 of clothing sales, the company only earns less than $0.50. With the US expansion, the country will become Inditex’s second-largest market by revenue, accounting for around 7% of revenue, even though its stores only represent 2% of the total.
Inditex’s expansion plan in the US is part of a €1.6 billion investment plan that the company announced at the beginning of the year. The funds will be used to open or expand stores around the world, with a focus on large stores that have a sales area 30% larger than the current average.
However, the expansion plan is not without its challenges. Inditex will face competition from Spanish competitors like Mango, which has struggled in the US market, and from Shein, whose sales in the US have already surpassed those of Zara and H&M combined in 2021.
In addition, the US market is already saturated with stores, and American consumers are suffering from inflation, reducing their spending.
The new strategic direction of Inditex comes amid a relevant change in the company’s leadership. Garcia and Marta Ortega, daughter of founder Amancio Ortega, took over as CEO and chairwoman, respectively, just over a year ago.
While the succession process was viewed with skepticism by some analysts, the company’s results have pleased the market, with last year’s sales increasing by 17.5% to €32.6 billion and net profit up 27% to €4.1 billion. Inditex is currently trading at €30.45, a multiple of around 20.5x its estimated profit for this year, which is a 10% discount from its historical average.