Spain: COVID-19 consequences for Inditex

Fashion giant Inditex, the owner of brands such as Bershka, Massimo Dutti and Zara, faces the consequences of the COVID-19 outbreak. In Spain, the fashion producer switched its clothes factories in Spain over to making medical supplies. Also, its logistical hub has almost ground to a halt. This effectively freezes the centre of Inditex's business from which it supplies its brand stores worldwide.

Closed stores

Due to various lockdowns all over the world, many retailers have to temporarily close shops. On top of that, some governments require all non-essential business to make their employees work from home in an attempt to contain the COVID-19 pandemic.

Currently, Inditex closed 3785 stores worldwide. This means about half of the shops are still open. Right now, questions raise as to how the company will continue to ship inventory. Inditex's thirteen factories in home market Spain have to stop producing garments. In order to remain open, as well as to fight the outbreak, the company switched to producing medical supplies such as masks and scrubs, reports Reuters.

Production

According to the company, about 57% of all fashion articles is produced near their headquarters in Spain. Most of it in Morocco, Portugal, Spain and Turkey. The company states that, through this, it can still refresh its stores around the world. A problem might be that logistic activities in Spain have almost come to a halt. Usually, Inditex makes two deliveries per week to keep stores up-to-date. This might change now. It is unsure whether this might be troublesome, as demand from brick stores has fallen dramatically.

"Store orders are not being taken care of during this time," says an anonymous union representative to Reuters. "All work for stores has stopped."

Medical materials

Inditex's founder, Amancio Ortega, reports that his foundation bought medical materials worth 63 million euros, including ventilators, masks and testing kits. They will be used in Spain's fight against the COVID-19 outbreak. The companies air traffic is an important aspect of Spain's capability in bringing medical supplies into the country. Most of them come from China.

H&M

One of Inditex's most important competitors, Swedish fashion giant H&M, reports that it expects a loss in sales for the second quarter of 2020. In March, the company already noted a 46% fall in sales. It is unclear how Inditex's sales currently perform.