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Zara owner hails unified inventory as it swings back to profit

Zara

The owner of fast fashion brand Zara has seen profits return in the second quarter as active management of inventory cushioned it against a decline in sales.

Spain’s Inditex reported a second-quarter net profit of €214 million, despite net sales falling 31% to €4.7 billion across the three months to 31 July. Operating expenses were also managed down 21% to €3 billion.

Echoing comments in the first quarter, the company said that its approach to sourcing products near to customers (proximity sourcing) and its unified inventory had allowed it to operate its supply chain as normal during the period.

The company said the unified inventory had allowed it to support the 74% growth in the online channel during the first half of the year.

Zara has managed down inventories in accordance with demand, leaving it with €2.2 billion in inventory at the end of July, down 19% year on year.

The company has some manufacturing plants in Asia producing products with stable demand while more expensive but flexible plants in Europe produce products with unpredictable demand. It also has a decentralised rather than centralised design process, meaning it can respond to market signals and bring products from design to sale in less than six weeks.