Inditex, the euro 13.8-billion global fashion retailer, might be close to launching its Massimo Dutti store format in India. The Foreign Investment Promotion Board (FIPB), the key wing in the finance ministry for clearing foreign direct investment (FDI) proposals, is slated to discuss an application made by the group at its meeting tomorrow.
Inditex, headquartered in Spain, and the Tata Group’s retail chain, Trent, had signed an agreement last year for bringing Massimo Dutti to India. Inditex already has its flagship Zara stores in India through a joint venture with Trent. While Inditex holds 51 per cent, Trent has 49 per cent in the venture.
In the season of single-brand retail, which recently saw a big-bang announcement by IKEA, the Scandinavian furniture major, the Inditex proposal at FIPB has triggered speculation about the chain raising FDI in the Indian venture. But Inditex indicated its venture with the Tata Group would continue. The FIPB application was made by Zara Holdings Netherlands, a group unit. According to the deal signed last year, Massimo Dutti would be a joint venture between Zara Holdings and Trent.
| MASSIMO DUTTI’S GLOBAL PLAY | ||
| STORES | ||
| 36 | 453 | 85 in Asia and rest of the world |
| FORMAT 1 of the 8 in the Inditex group, contributes 7.3% of the total sales, against Zara’s 64.8% | ||
| REVENUE euro 1 billion from sales in 2011 from 573 stores globally | ||
| Other formats of the group | ||
| ||
| Source: Inditex annual report 2011; revenue figures as of the end of 2011 | ||
To a query from Business Standard, the Inditex spokesperson (communication and institutional relations in the corporate division) said, “Our relationship with the Tata Group is very strong and we look forward to working with them.” Refusing to comment specifically on the FIPB application, the spokesperson said, “We will let you know of any further developments.”
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Inditex, which has 5,618 stores in eight formats around the world, signed an agreement with the Tata Group in February 2009 to form a joint venture for launching Zara outlets in India. It opened the first one in 2010. There are eight Zara stores, across Mumbai, Pune, Bangalore and Delhi.
Globally, the eight formats that Inditex operates are Zara, Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterque.
Trent and Inditex have done the spadework to open Massimo Dutti stores and are planning to open four to five outlets in the coming months, according to sources. Massimo Dutti had 573 stores across 50 countries as of end-2011, and it offers a variety of collections, from high-end fashion to casual wear. The group plans to open six to seven Zara stores in India every year, it is learnt. Worldwide, Zara contributes 64.8 per cent to the group’s sales revenue. Zara’s global revenue is an estimated euro 8.9 bn, against Massimo Dutti’s euro 1 bn. There are around 1,830 Zara stores in the world.
The success of these stores has prompted both partners to look at more formats, industry sources say.
Even as Trent is focusing on Zara and planning Massimo Dutti stores, it has deferred opening of the Topman and Topshop stores of the Arcadia group of Britain, with which it has a franchisee agreement. Trent has also significantly restructured the operations of the Sisley stores of the Benetton group and was reviewing its five-year franchisee agreement with Benetton for Sisley.
“We will focus on bigger businesses and exit from smaller, loss-making ventures,” a Trent executive had told Business Standard sometime earlier.
In 2011, Massimo Dutti, with a range of fashion options designed for cosmopolitan men and women, opened 43 stores in 13 countries. As many as 15 were opened in China, many of these in places where there had previously been no presence, the annual report of the Inditex group said. Besides opening high-street outlets in Amsterdam and Moscow, it also rolled out its online store in 2011. Since September 2011, Massimo Dutti has had an internet sales platform in 10 European markets.
Inditex showed a sharp rise in quarterly earnings in its results announced early June, thereby bucking the recessionary trends in Europe. It recorded a 30 per cent rise in first-quarter net profit to euro 432 mn. Asian buyers are learnt to have contributed much to the company’s growth. Estimates suggest this year the group would reduce its sales in Spain to about 22 per cent of the total, and increase those from emerging markets such as China to 45 per cent.
FDI up to 100 per cent is allowed in single-brand retail in India now,up from 51 per cent till a few months earlier. But riders such as 30 per cent sourcing from Indian small sector have put off foreign investors.