Thursday, June 13, 2024

ECONOMY | 20-07-2023 12:16

Spanish multinational Inditex exits Argentina by franchising Zara

Spanish giant Inditex has decided to transfer the management of its brands' operations in Argentina and Uruguay mainly due to import restrictions.

Spanish retail giant Inditex, owner of the Zara chain, announced that it is leaving Argentina, following the path of other multinational companies.

The company, owned by entrepreneur Amancio Ortega Gaona, one of the richest people in the world with a net worth of US$ 77.3 billion according to Forbes, informed in a press release that it has reached a preliminary agreement with multinational Regency Group to transfer the management of its brands' operations in Argentina and Uruguay.

The new responsible party for the chain in the country is the same one that took over Nike's management last year.

Under this agreement, Zara and Zara Home, which entered Argentina 25 years ago, will continue to operate in the region through a franchise contract managed by Regency.

With a business model heavily reliant on clothing imports, Zara has found it difficult to operate  in the country in recent years.

Its situation was no different from that of other players in the industry. The most extreme case was Chilean company Falabella, which closed its operation in Argentina in mid-2021, after its failure to find a local partner and a buyer for its assets in the country.

Another example of sector adversity is the Brazilian chain Renner. It entered the country in 2019, with a US$12 million investment. However,  it has had two of its four stores closed for several months.

About Regency Group
The group, of Panamanian origin, has been operating Inditex brands such as Stradivarius and Bershka, as well as Converse, Forever 21, Under Armour, and Aeropostale for over 20 years.

The conglomerate is present in 13 Latin American countries, with over 5,000 employees, approximately 400 stores in the region, and an annual revenue of US$300 million.

According to the companies, after the closing of this transaction, Regency Group will integrate the entire Inditex workforce in Argentina and Uruguay into its team.

Both brands currently have 11 stores in Argentina and four in Uruguay.

"When the operation is completed, they will continue to offer their quality fashion garments and their commitment to excellent customer service in both countries," the press release states.

However, it adds that Inditex's commercial teams will remain strongly linked to the activity of their brands in Argentina and Uruguay, as is the case in all the countries in the region where similar agreements are in place.

Neither inflation nor the impact of the conflict between Ukraine and Russia have dampened Inditex's profits in 2022.

According to its annual results, the group, which includes brands such as Pull&Bear and Massimo Dutti in addition to Zara, achieved sales of US$ 34.6 billion, representing an increase of 17.5% compared to 2021, surpassing analysts' expectations, and also 15.1% more than its previous record of US$ 30,000 (€28.286 billion) achieved in 2019.



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