Business

New dual action strengthens Ortega family’s position in Inditex

FILE PHOTO: A building is reflected through the window of a Zara clothing store in Bilbao
FILE PHOTO: A building is reflected through the window of a Zara clothing store, part of the Inditex Spain group, in Bilbao, Spain, November 30, 2021. REUTERS/Vincent West/File Photo

December 13, 2021

By Corina Pons and Jesus Aguado

MADRID (Reuters) – An experienced management team should make a smooth leadership change at Inditex next year, when the family of billionaire founder Amancio Ortega will squeeze more closely with the largest fashion retailer world, sources and analysts said.

Investors were rocked last month when the owner of the Zara chain said veteran executive chairman Pablo Isla would step down to be replaced by a chief executive with no retail experience and her daughter. Ortega’s 37-year-old daughter, Marta, will become the company’s president.

Shares of Inditex fell 6.1% on the day of the announcement, wiping about 5.6 billion euros ($6.3 billion) from its market value. Investors are particularly worried about Isla’s departure, as he led Inditex for a decade and helped turn it into the envy of the industry.

However, the new leaders will be supported by a committee of managers who have been with the company for 18 to 42 years, providing ongoing and robust support, analysts and experts. informed source said.

Two of the top ten are also family members with decades of experience with the Zara and Massimo Dutti brands.

A company source said: “The key to these change(s) is the establishment of a management committee that will allow the family to take back control of Inditex after ceding part of the power to Pablo Isla. for more than 15 years.

Marta Ortega will begin her new role as Inditex’s non-executive president in April alongside new chief executive Oscar Garcia Maceiras. Garcia Maceiras, a lawyer who has spent most of his career in banking, is from the northern Spanish city of La Coruna, where Inditex is headquartered.

COME TO MARTA

Isla, who worked for six years with Amancio Ortega before the company’s founder retired in 2011, has taken the helm at Inditex for a decade since. Isla has not said what she plans to do after she leaves.

Adam Cochrane, an analyst at Deutsche Bank Research, said Marta Ortega’s non-executive role raised some eyebrows, but it would be a mistake to read too much into her title.

“Non-executive Chairwoman is a common role across the industry, but with time involved in business and family relationships, her influence is likely to be greater in decisions,” he said. strategic and brand positioning compared to other seats”.

Marta, who has worked at Inditex for 15 years, has focused on brand image and fashion at Zara, the business that contributes 70% of Inditex’s revenue.

Amancio Ortega’s young daughter also oversaw Zara’s sustainability initiatives and campaigns with artists and fashion photographers such as Steven Meisel, Fabien Baron and Karl Templer.

TEAM PLAYERS

People who have worked with Garcia Maceiras and sources familiar with Inditex say his ability to delegate and coordinate will work best for a management team to navigate COVID restrictions and push business forward. Sales were 7% above pre-pandemic levels in the second quarter, outperforming H&M’s closest rival.

Four people who knew Maceiras at Spanish lenders Santander, Popular and Pastor and a Spanish currency bank described him as hard-working, skilled at coordination and a sports lover. .

“(Garcia Maceiras) is a player on the team (…) who is neither an investment banker nor has a high reputation. No one can expect a big shake-up from him at Inditex,” said a source who used to work with him at a Spanish bank, who asked to remain anonymous.

Adding to the sense of continuity, his predecessor as CEO, Carlos Crespo, transitioned into the role of chief executive officer and will be part of the executive committee.

SUCCESS STRATEGY

Inditex’s success, according to Jefferies, lies in its supply chain, which allows it to pivot its fashion to customers’ whims in a more targeted and timely manner than its competitors.

The company, which also owns Bershka and Pull & Bear, produces more than half of its clothing in neighboring countries such as Morocco, Turkey and Portugal, helping them avoid the worst of the supply chain. currently affecting the field.

The Spanish company also quickly adapted to the pandemic by using its stores as logistics hubs to support online demand.

Inditex will report third-quarter results on Wednesday, with sales growth expected to be up to 10% year-over-year in 2019, according to notes from Credit Suisse, RBC Capital Markets and Jefferies.

In addition to weathering the limited wave of the pandemic, the new management team will need to demonstrate that they can improve sales of the company’s smaller brands and deal with the threat from competitors. new online as China’s Shein.

Guido Stein, author and professor at Madrid IESE business school, believes the new dual action will face challenges but start from a solid base.

“A period of uncertainty is opening. The big advantage of all of this is that the kingdom of Inditex is doing very well,” he said.

(Reporting by Corina Pons and Jesus Aguado; Additional reporting by Clara-Laeila Laudette; Editing by Keith Weir and Mark Potter)

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Bobby Allyn

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