Zara's profits decline in India

For the first time, Spanish fashion brand Zara has seen a dip in profits and sales in India. Rising expansion

costs and a weakened rupee have impacted its margins. Inditex Trent, a joint venture between Zara brand owner Inditex and the Tata Group, reported a 35 percent fall in profit for the year ended March 2014 at Rs 29.94 crores.

While Zara’s merchandise was the main reason for its growth so far, it had also opened initial stores in marquee locations. But most of their expansion now has been in areas that attract similar costs but don’t really match up in terms of sales. Due to higher competition, Zara kept its prices low. Since most of its merchandise is imported, and the Indian currency has fallen, profitability has taken a hit.

During 2013-14, Zara opened five stores, the highest in a year so far, taking its tally to 13 doors in the country. Zara has remained in black from the first year of its India operations by striking hard bargains with landlords and mall owners and keeping real estate costs in control. Most of Zara’s back-end and merchandise sourcing is handled by Inditex while the Tata expertise is mainly for identifying real estate and locations.