€1.2m loss for Zara outlets - more shops still planned

FASHION CHAIN Zara made a loss of almost €1.2 million from its Irish stores last year – around five times the loss it made the previous year.

As consumers cut back spending on discretionary items, Zara’s turnover slipped 9.4 per cent to €46.3 million in the 12 months to the end of January 2010. Although costs stabilised, the retailer made a pretax loss of €1.2 million and a net loss of €1.17 million. This compares to losses of around €236,000 the year before.

The company did not pay a dividend to its Spanish parent, Inditex, as has been the practice in recent years, according to accounts just filed at the Companies Office for Za Clothing Ireland.

Other clothing brands within the Inditex group also showed a pattern of deepening losses during a tough year for retailers operating in Ireland.

Pull & Bear, which has five stores in Ireland, saw its losses deepen to €2.75 million, compared to almost €1.8 million a year earlier, as sales dipped 22 per cent to €5.3 million.

Stradivarius, which has two stores at Newbridge and on Henry Street in Dublin, made a loss of €751,000, compared to a profit of around €14,000 the year before. Turnover fell from around €3.1 million to €2.4 million.

Accounts for Bershka Ireland show it made a loss of €1.3 million, a better performance than the previous year, when it lost €1.6 million. Turnover at Bershka, which has five stores in Ireland, fell 7.65 per cent during the period.

Massimo Dutti was the only one of the five Inditex brands to retain a profit on its Irish operations over the period. The brand, which targets men and women aged 25-50, made a profit of around €542,000, compared to just under €1 million the year before, from its sole store in Ireland in the Dundrum shopping centre in Dublin. Turnover at the store fell from €5.4 million to €4.2 million, its accounts show.

While Inditex took dividends of €2.5 million on its 2008 performance, receiving €1.2 million from Za Clothing and €1.3 million from Massimo Dutti, neither company paid a dividend this year. In 2007, the dividends paid to the Spanish parent were even higher, at €4.6 million.

Zara is the largest of the Inditex brands, operating nine stores and employing 311 people on average in 2009, down from 352 in 2008. Across the five brands, average employee numbers fell from 505 to 450, as the group cut costs to reflect lower turnover.

Figures from the Central Statistics Office show sales of clothing and footwear in Ireland fell 9 per cent in value over the year to January 2010. Volumes of sales in this category rose 1.8 per cent, indicating retailers slashed clothes prices in order to attract customers.

Despite its losses, Inditex has indicated it intends to open further stores in Ireland “as soon as suitable opportunities arise”. The group recently extended its Zara online offering to Irish customers.

Inditex is the largest fashion retailer in the world, with 4,780 stores and net sales of €5.5 billion in the first half of 2010 – ahead of Gap Inc.

Globally, sales are up 14 per cent compared with the first half of 2009.