Zara’s India profit drops as it faces competition from other brands

Spanish fast fashion brand Zara has reported a 13.4 per cent drop in its net profit over the last financial year in India, reflecting increased competition and a drop in demand during the period. The loss came despite a 17.7 percent increase in sales over the year to Rs 1,438 crore (208 million dollars), which suggests the company has been heavily discounting to maintain stock turnover. Inditex, the owner of Zara fashion brand, is facing increasing competition in India from global rivals including Hennes & Mauritz. Inditex operates in the country through two JVs with Trent, the Tata Group's retail arm, one for Zara and another for bridge-to-luxury label Massimo Dutti.

Two years ago, Zara India saw a 40-per-cent drop in profits after ruthlessly slashing prices to beat competitors. The brand opened two new stores in the territory and expanded its presence to a total of 10 Indian cities during the last financial year. The primary challenge to the brand’s faster expansion is the availability of high-quality retail spaces that could be expected to generate reasonable sales throughput.

Zara has been a success in India since its arrival in the country in 2010 and clocks nearly Rs 65 crore from each store on an average, nearly double than its closest rival H&M. Trent, in the annual report said, the incremental store opening program for Zara continues to be calibrated. However, H&M clocked over Rs 1,100 crore in sales during year ended November 2018, opening a store very month on an average taking its overall tally to 42. Also, Japanese fashion brand Uniqlo plans to roll out its first store in India in the New Delhi region later this year.