Zara has recorded a sharp fall in UK profits despite sales breaking through the £600m barrier for the first time.
Pre-tax profits at the British subsidiary of the Spanish fashion group Inditex, which owns the Zara brand, dropped by one-third to £39.2m in the year to 31 January, down from £58.3m in 2016. Sales rose by 13% to £602.7m.
Zara pointed to an 11% jump in costs due to an investment programme that included store refurbishments and moving its London head office to a different Mayfair address. The company also closed stores at Oxford Circus in central London and at Gatwick.
As a result of the upheaval, Zara said it paid its parent company dividends totalling £30.5m, down from £47m in 2016.
The reduced payout did not hurt the wallet of the Inditex founder, Amancio Ortega, one of the world’s richest men with a fortune of $79.6bn (£60bn), according to Forbes. In March, Inditex, which is listed on the stock market in Spain, said Ortega would receive a €1.26bn payout after the group reported record sales of €23bn and net profit up by 10% at €3.2bn.
Ortega, 81, opened the first Zara in the Galician city of La Coruña in 1975. Over the past four decades, the company has become the world’s biggest clothing retailer, with more than 7,400 stores and a stable of brands that includes Zara Home, Massimo Dutti and Pull & Bear.
Although Zara, which arrived in the UK in the late 1990s, is feted by the fashion pack, it only just makes the UK’s top 20 list of womenswear retailers based on market share. The research company GlobalData ranks Zara 19th with a market share of 1.5%, compared with the market leader, Marks & Spencer, on 9%. Next and Primark are number two and three respectively.
Zara also refurbished some of its London shops to “keep the stores’ layout and atmosphere in line with the Zara brand image”.
