FT : Zara owner bets on big stores to keep sales space growing

Zara owner bets on big stores to keep sales space growing
Inditex says fashion retailer’s shops serve as showcase for the brand and as warehouses for ecommerce

The owner of fashion brand Zara is accelerating a “go big” store strategy by opening its largest shop in the world in Rotterdam and doubling the size of other flagships to make space for new product lines and ecommerce logistics.

Óscar García Maceiras, chief executive of Spanish group Inditex, said that in November it would open a 9,000 square metre Zara outlet in the Dutch city. The size comes close to matching the 9,900 sq metre average of the UK’s 10 biggest Tesco supermarkets.

While other fashion retailers are switching to smaller stores as inflation drives up costs, Inditex is bucking the trend as it posts robust sales growth.

Investors were disappointed, however, that its latest quarterly results on Wednesday, for the three months to July 31, pointed to a modest slowdown in sales growth, sending its share price down €1.18 — 3 per cent — to €34.61. Shares in the company, valued at €108bn, nonetheless remain up 35 per cent this year.

Announcing the results, García Maceiras said that in addition to the store in Rotterdam’s Coolsingel street, Inditex was doubling the size of flagship stores near Paris’s Hotel de Ville and in Miami’s Dadeland district.

Although Inditex, which has operations in more than 90 countries, has long sought eye-catching stores in landmark buildings, the shift to even bigger spaces serves two new purposes.

It enables the company to accommodate a proliferation of new product lines under the Zara brand, which now encompasses cosmetics, footwear and sports clothes as well as the homeware of Zara Home.

It also allows space for the growing role stores play in online sales, either as mini-warehouses from which packages are shipped out or as sites where consumers can pick up orders and return unwanted goods.

Hailing a new store design also being rolled out in Dubai, São Paulo and Shenyang, García Maceiras said it integrated the “most sophisticated interiors with the functional and digital sections like fitting rooms, self-checkout areas, click and collect points . . . and stockrooms”.

At the same time as opening bigger stores, Inditex is closing down smaller underperformers. Its total number of shops globally stood at 5,745 at the end of July, down from 6,370 a year ago, with the cut in numbers spread across Zara and all its other brands: Pull & Bear, Massimo Dutti, Bershka, Stradivarius and Oysho.

Inditex’s rivals are also reshaping to address changing conditions. UK-based retailer Next has been gradually reducing its store numbers. Abercrombie & Fitch has been closing costly and oversized flagships and replacing them with smaller, more efficient and less expensive ones.

Overall this year, Inditex executives said they expected its retail space to increase by 3 per cent, but stressed that rising “store productivity” was also driving sales.

In a routine trading update published alongside its quarterly results, Inditex said sales in the five weeks starting on August 1 were up 14 per cent from a year ago. Patricia Cifuentes, analyst at Bestinver, described the figure as “weaker than expected” given that sales in the first six months of Inditex’s financial year had been up 16.6 per cent.

The company’s earning figures, however, were more positive. Net income in the three months to July 31 jumped 30 per cent to €1.35bn with margins increasing, allaying concerns that inflation could increase production costs and crimp profitability.

>>> US : Brokers Upgrades & Downgrades - 13th of September 2023

Research Calls
  • Upgrades:
    • American Electric (AEP) upgraded to Neutral from Sell at Ladenburg Thalmann
    • General Motors (GM) upgraded to Buy from Neutral at UBS; tgt raised to $44
    • Immunocore (IMCR) upgraded to Overweight from Neutral at JP Morgan; tgt raised to $22
    • Sealed Air (SEE) upgraded to Outperform from Neutral at Credit Suisse; tgt lowered to $47
    • UMB Financial Corporation (UMBF) upgraded to Overweight from Neutral at Piper Sandler; tgt $74
  • Downgrades:
    • ACELYRIN (SLRN) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt $19
    • Ball Corp (BALL) downgraded to Neutral from Outperform at Credit Suisse; tgt lowered to $58
    • O-I Glass (OI) downgraded to Neutral from Outperform at Credit Suisse; tgt raised to $22
    • Oracle (ORCL) downgraded to Neutral from Overweight at JP Morgan; tgt lowered to $100
    • Tapestry (TPR) downgraded to Neutral from Overweight at Redburn Atlantic; tgt $33
    • Ultrapar Participacoes (UGP) downgraded to Neutral from Buy at Goldman; tgt lowered to $4
  • Others:
    • Adient (ADNT) initiated with a Neutral at UBS; tgt $43
    • American Axle (AXL) initiated with a Neutral at UBS; tgt $9
    • Aptiv (APTV) initiated with a Buy at UBS; tgt $143
    • Ares Commercial Real Estate (ACRE) initiated with an Equal Weight at Wells Fargo; tgt $10
    • Atlantic Union Bankshares (AUB) initiated with an Overweight at Stephens; tgt $36
    • B&G Foods (BGS) initiated with an Underperform at TD Cowen; tgt $10
    • Beyond Meat (BYND) initiated with an Underperform at TD Cowen; tgt $10
    • BorgWarner (BWA) initiated with a Buy at UBS; tgt $52
    • Cactus (WHD) initiated with a Neutral at JP Morgan; tgt $60
    • Campbell Soup (CPB) initiated with a Market Perform at TD Cowen; tgt $45
    • Conagra (CAG) initiated with a Market Perform at TD Cowen; tgt $32
    • Charles River (CRL) initiated with a Market Perform at TD Cowen; tgt $212
    • Dana Inc (DAN) initiated with a Neutral at UBS; tgt $17
    • Expro Group (XPRO) initiated with an Overweight at JP Morgan; tgt $30
    • Ford Motor (F) initiated with a Buy at UBS; tgt $15
    • Fortinet (FTNT) initiated with an Overweight at CapitalOne; tgt $74
    • Freshpet (FRPT) initiated with an Outperform at TD Cowen; tgt $90
    • General Mills (GIS) initiated with a Market Perform at TD Cowen; tgt $70
    • Gorman-Rupp (GRC) initiated with a Buy at Northcoast; tgt $40
    • Hershey Foods (HSY) initiated with an Outperform at TD Cowen; tgt $250
    • Hostess Brands (TWNK) initiated with a Market Perform at TD Cowen; tgt $34
    • ICF International (ICFI) resumed with a Mkt Perform at William Blair
    • ICON plc (ICLR) initiated with an Outperform at TD Cowen; tgt $306
    • Lear (LEA) initiated with a Neutral at UBS; tgt $150
    • J.M. Smucker (SJM) initiated with an Outperform at TD Cowen; tgt $158
    • Kellogg (K) initiated with a Market Perform at TD Cowen; tgt $63
    • Kraft Heinz (KHC) initiated with a Market Perform at TD Cowen; tgt $35
    • Lamb Weston (LW) initiated with an Outperform at TD Cowen; tgt $125
    • Magna (MGA) initiated with a Neutral at UBS; tgt $63
    • McCormick (MKC) initiated with a Market Perform at TD Cowen; tgt $87
    • Mondelez Int'l (MDLZ) initiated with an Outperform at TD Cowen; tgt $82
    • Mobileye Global (MBLY) initiated with a Buy at UBS; tgt $48
    • NV5 Global (NVEE) initiated with an Outperform at William Blair
    • Redwire Corporation (RDW) initiated with a Buy at ROTH MKM; tgt $10
    • Rivian Automotive (RIVN) initiated with a Neutral at UBS; tgt $26
    • Seacoast Banking (SBCF) initiated with an Equal-Weight at Stephens; tgt $23
    • Sociedad Quimica y Minera (SQM) initiated with a Buy at Citigroup; tgt $85
    • Tesla (TSLA) initiated with a Neutral at UBS; tgt $290
    • Tetra Tech (TTEK) initiated with an Outperform at William Blair
    • TKO Group Holdings (TKO) initiated with a Buy at Guggenheim; tgt $130
    • Towne Bank (TOWN) initiated with an Equal-Weight at Stephens; tgt $23
    • TreeHouse Foods (THS) initiated with a Market Perform at TD Cowen; tgt $45
    • Utz Brands (UTZ) initiated with an Outperform at TD Cowen; tgt $18
    • Uranium Energy (UEC) initiated with a Speculative Buy at TD Securities; tgt $6
    • Veeco Instruments (VECO) initiated with a Buy at Citigroup; tgt $35
    • Visteon (VC) initiated with a Neutral at UBS; tgt $157
    • Vital Farms (VITL) initiated with a Market Perform at TD Cowen; tgt $13

>>> US Gapping up

Gapping up
In reaction to earnings/guidance
:
  • REVG +9.9%
Other news:
  • RCKT +22.4% (reaches FDA alignment on Phase 2 Trial Design for RP-A501; also prices offering of 7812500 shares of its common stock at $16.00 per share and pre-funded warrants to purchase 3126955 shares of common stock at$15.99 per pre-funded warrant)
  • SGML +16.5% (is evaluating potential strategic alternatives)
  • MYNZ +13.4% (ColoFuture Study update)
  • OCUL +4.4% (submitted a request for a Special Protocol Assessment for the first of the Company's two planned OTX-TKI pivotal trials)
  • MRNA +4.1% (expands the field of MRNA medicine with positive clinical results across cancer rare disease and infectious disease)
  • SLI +3.2% (acquires large parcel of land for South West Arkansas Project)
  • RKLB +2.9% (RKLB signs contract with LDOS to launch four HASTE missions)
  • CRNX +2.3% (upsizes and prices offering of 11441648 shares of its common stock at $30.59 per share)
  • MOR +2.1% (receives FDA Fast Track designation for tulmimetostat in endometrial cancer)
  • RCKY +2% (CFO resigns)
  • CECO +1.4% (acquires Kemco Systems; raises FY23 revs outlook)
  • JACK +1.2% (names new Del Taco Brand President)
  • HRT +1.1% (authorizes additional $25 mln share repurchase program)
Analyst comments:
  • SEE +1.1% (upgraded to Outperform from Neutral at Credit Suisse)

>>> US Gapping down

Gapping down
In reaction to earnings/guidance
:
  • EPM -13.1%, SAVE -3.9% (guidance), AAL -2.8% (guidance), BUR -1.7%, MOS -0.9% (releases July and August revenue)
Other news:
  • EPM -13.1% (Evolution Petroleum and PEDEVCO (PED) enter into strategic partnership to jointly develop PEDEVCO's Chaveroo Field in the Permian Basin)
  • AAOI -12.4% (disclosed after hours it terminated Prime World sale; amended Equity Distribution Agreement)
  • LAZY -6.7% (announces plans for rights offering to stockholders)
  • VIRT -5.3% (SEC files complaint against co after settlement talks fail)
  • GRNT -4.7% (prices secondary offering of 7.1 mln shares of common stock at $5.00 per share)
  • NVO -2.8% (conducts a two-for-one stock split)
  • SQSP -2.7% (prices offering of 5 mln shares of common stock at $29.00 per share)
  • ZNTL -2% (details 2023 catalysts in presentation)
  • SPSC -1.9% (completes acquisition of TIE Kinetix)
  • SBOW -1.7% (stock offering)
Analyst comments:
  • BALL -1.3% (downgraded to Neutral from Outperform at Credit Suisse)

>>> US Early premarket gappers

Early premarket gappers

Gapping up:
MYNZ +22.4%, RCKT +16.8%, RKLB +4.2%, SLI +3.5%, CRNX +2.5%, SGML +2.1%, RCKY +2%, MOR +2%, REVG +2%, HRT +1.7%, VFS +1.5%, JACK +1.2%, FIVE +1.1%
Gapping down:
EPM -13.9%, LAZY -6.7%, GRNT -4.9%, AAOI -4.8%, VIRT -4.2%, SAVE -3.8%, SBOW -3.7%, NVO -2.6%, SQSP -1.6%, BEN -0.9%, VRDN -0.8%, RTX -0.7%, VCTR -0.6%

>>> Europe : Brokers Upgrades & Downgrades - 13th of September 2023 V2(+)

>>> Up
* Boliden Raised to Neutral at Citi; PT 330 kronor
* Costain Raised to Buy at Peel Hunt
* CVS Group Raised to Outperform at RBC; PT 1,900 pence
* Inventiva SACA Raised to Buy at KBC Securities (+)
* Marks & Spencer Raised to Overweight at Morgan Stanley
* Pandora Raised to Hold at SocGen; PT 754 kroner
* Sword Raised to Buy at IDMidcaps; PT 45 euros (+)

>>> Down
* AB Foods Cut to Hold at Deutsche Bank; PT 2,260 pence
* Kingspan Cut to Neutral at JPMorgan; PT 80 euros
* Oracle Cut to Neutral at JPMorgan; PT $100
* Petershill Cut to Add at Numis; PT 180 pence

>>> Initiation
* AFRY AB Rated New Hold at DNB Markets; PT 150 kronor
* Albemarle Rated New Outperform at Haitong Intl; PT $240
* Alstom Reinstated Underweight at Barclays; PT 16.50 euros
* Eurogroup Laminations Rated New Buy at Berenberg; PT 7 euros
* Kellogg Rated New Market Perform at Cowen; PT $63
* Knorr-Bremse Rated New Underweight at Barclays; PT 45 euros
* Kraft Heinz Rated New Market Perform at Cowen; PT $35
* Mondelez Rated New Outperform at Cowen; PT $82
* Sweco Rated New Buy at DNB Markets; PT 135 kronor
* United Internet Resumed Buy at Deutsche Bank; PT 23 euros (+)
* Wynnstay Rated New Buy at Canaccord; PT 520 pence (+)

>>> Call
* Akzo Nobel Drops in ‘Overreaction’ to Conference Comments: MS
* Inditex Earnings Reaffirm Organic Market Share Gains: Jefferies (+)

>>> Stoxx 600 Pre-Market Indications

  • Fresenius Medical (FME TH) +1.1%
    • UBS upgrades stock to neutral: APA
  • Inditex (IXD1 TH) -1%
    • Inditex 1H Ebit Beats Estimates
  • Adyen (1N8 TH) -1%
  • Vestas (VWSB TH) -1%
  • Nel (D7G TH) -1.1%
  • Stellantis (8TI TH) -1.1%
  • Bayer (BAYN TH) -1.3%
  • Schneider Electric (SND TH) -1.4%
  • BP (BPE5 TH) -1.7%
  • Alstom (AOMD TH) -2%
  • Knorr-Bremse (KBX TH) -2.1%
    • Knorr-Bremse Rated New Underweight at Barclays; PT 45 euros

>>> TradeGate Pre-Market Indications

DAX:
  • BMW (BMW TH) -0.3%
    • BMW Backtracks From Charging Subscriptions for Heated Seats
  • Deutsche Bank (DBK TH) -0.6%
    • Deutsche Bank Scraps 60% of Trading Apps With Costs in Focus
  • Bayer (BAYN TH) -1.1%
    • JPMorgan cuts stock to neutral: APA
  • Vonovia (VNA TH) -1.2%
MDAX:
  • TeamViewer SE (TMV TH) +3.3%
    • Teamviewer Cuts Scope of Manchester United Partnership
  • Duerr (DUE TH) -0.9%
  • SMA Solar (S92 TH) -1.4%
SDAX:
  • MorphoSys (MOR TH) +3.5%
    • Morphosys Endometrial Cancer Drug Gets Fast Track Designation
  • AUTO1 (AG1 TH) -2.7%
    • AUTO1 2Q ADJ. EBITDA LOSS EU40.0M, EST. LOSS EU18.1M (2 EST.)

WWD : Chanel Takes London With Major V&A Exhibition About the Designer’s Life

Chanel Takes London With Major V&A Exhibition About the Designer’s Life
"Gabrielle Chanel. Fashion Manifesto," a look at the woman behind Chanel, opens this week at the V&A museum in London.


LONDON — In a grand cross-channel gesture that would have put a smile on Gabrielle “Coco” Chanel’s sun-kissed face, Chanel and the Victoria & Albert Museum have put on a show that explores the designer’s life, style and abiding love for Grande Bretagne.

“Gabrielle Chanel. Fashion Manifesto” is the first U.K. exhibition dedicated entirely to the French fashion designer. It charts six decades of her career, starting with the opening of her first millinery boutique in Paris in 1910, and ending with her final show in 1971.

On Tuesday night, the V&A welcomed VIP guests for a preview, with the exhibition opening to the public this Saturday and running until Feb. 25 at the museum’s Sainsbury Gallery.

“The V&A is probably one of the best institutions in the world and the exhibition offers a good direction. It’s easy to follow, and you don’t need to be an expert in Chanel to understand what’s happening,” said Bruno Pavlovksy, president of fashion and president of Chanel SAS.

He added that Chanel would “benefit from the wider audience that the V&A attracts.”

Chanel has been digging deep into the U.K., transferring its global headquarters to London, and planning to show its next Métiers d’Art collection in Manchester on Dec. 7.

“The U.K., especially London, has always been a good partner to us as we continue to write the story of the brand,” he said in an interview ahead of the opening.

Pavlovksy declined to reveal any details about the Manchester show for now, but described the decision to show in the northern city as “audacious, interesting” and in keeping with creative director Virginie Viard’s creativity, and the house’s globetrotting strategy.

“We were in Los Angeles, we were in Dhaka [Bangladesh], and this year we are in the U.K. We continue to engage our customers everywhere, and that’s the most important thing to me. A few weeks after the October show in Paris, we are going to Shenzhen for something very big. We try to be everywhere, but it always comes with a big focus on the local customers,” he said.

This year, the U.K. customer is front and center. “The fashion business in the U.K. after the pandemic has been performing quite strongly. We have seen a lot of locals back in the boutiques,” Pavlovksy said.

Chanel has also been investing heavily in the market. It is building an office, set to open in 2025, at 38 Berkeley Square to house its global headquarters, which it relocated to London from New York in 2018.

Designed by architects Piercy and Co. and to be constructed “to the highest standards of sustainability and accessibility,” the new building is more than double the size of the current Chanel headquarters in the Time & Life Building at 1 Bruton Street.

The Bruton Street headquarter is right next to the brand’s London flagship at 159 New Bond Street, for which it reportedly paid 310 million pounds in 2022.

During the interview, Pavlovsky also defended the brand’s decision to increase the price of its popular handbag styles multiple times since COVID-19 struck.

Most recently, the brand increased the prices of its Classic Flap bags by 6 percent to 8 percent in Australia, Japan and China on Sept 1. The bag is now being sold at $10,200.

“From a pricing position, we are at the top of the market for good reason, because of the material, and the sophistication. We have been very challenged over the past three years to be able to guarantee and supply the best materials.

“We also want to protect our customers. We don’t want to have the English or French prices being more or less expensive than in Japan or China. Our first and main target is our local customers. We don’t want people making money by buying in one country and selling in another,” Pavlovksy said.

Those looking to tap into Chanel’s style, however, don’t have to pay such a hefty price. The exhibition at the V&A is free.

The V&A show is based upon an exhibition of the same name, which took place at the Palais Galliera in Paris in 2020, although it’s different in several aspects, according to curator Oriole Cullen, head of modern textiles and fashion at the museum.

The show space is bigger and comes with a more elaborate set design, which took eight weeks to assemble. There is also an additional part that looks at Chanel’s personal and business connections to the U.K.; a section that showcases her luxurious cocktail suits, and a bigger space for the wide range of the brand’s custom jewelry.

Some 100 new items have been added to the show, such as a painting of Chanel by Winston Churchill and a red evening gown made for Chanel by the Manchester Velvet Company. In total, the exhibition features more than 200 looks sourced from V&A’s own collection in addition to those from the Palais Galliera and the Patrimoine de Chanel, the heritage collections of the fashion house in Paris.

Chanel had strong links with Britain through her relationships with Arthur “Boy” Capel and subsequently Hugh Grosvenor, the second Duke of Westminster. The show also reveals that the designer had been sourcing cloth from Britain since the early 1920s, and by 1927 had set up a salon in London, offering garments tailored to a British audience.

In 1932, Chanel established British Chanel Ltd to work directly with U.K. textile manufacturers. She worked with Broadhead and Graves of Huddersfield to produce jerseys, wools and silks; Ellaness, the production division of the Lyle and Scott, on knitwear, and David Moseley on rainwear.

“We also added a section on stage and screen, because we have original costumes from ‘Le Train Bleu,'” Cullen said. The one-act ballet made its U.K. debut at the Coliseum Theatre London in 1924 and starred Lydia Sokolova, Anton Dolin, Bronislava Nijinska and Leon Woizikowsky.

Cullen said the V&A show also targets a much boarder audience than the original version.

“The Palais Galliera is a fashion museum in Paris. Their audience is very clued up about fashion. The V&A has quite a general audience, and people will go to all different types of shows. A lot of the feedback we had early on was who is Gabrielle Chanel? Is she related to Coco?” Cullen said.

“When you come into the show, there is a big timeline. Although this show is not biographical, it tells you who Gabrielle Chanel is, and puts her within her own timeline. We also try to create a sense of movement through the space. Because it’s a big exhibition, there’s a lot to see. And it’s important there is a bit of a rhythm. A lot of consideration went into [offering] the visitor a different experience,” she added.

The showstopper is the suit room, where 54 Chanel tweed suits are on display on a curved wall with two levels.

“It runs from a very muted neutral palette all the way through to incredibly bright colors, and it really reflects fashion in the ’60s and what Chanel was doing at the time,” Cullen noted.

Another V&A show highlight is the recreation of the mirror stairs in Chanel’s apartment at the Ritz in Paris at the end of the exhibition.

That part of the show focuses on Chanel’s eveningwear offering toward the end of her career, and there is one dress from the last collection she designed in 1971. The collection was presented two weeks after she died at the age of 87.

The exhibition doesn’t shy away from Chanel’s connection to the Nazis, and the role she played during World War II. It provides context and evidence from this period and acknowledges that Chanel’s activity during the war cast a shadow over her legacy. It has been the subject of a number of articles and publications for the past 70 years.

An underlying theme that Cullen hopes the professional audience will notice is how Chanel created the formula for the brand early on, and kept revisiting and reinventing key elements in order to keep up with the times. Those elements and house codes remain the backbone of the Chanel brand’s success.

In 2022, the company reported revenues gained 17 percent to $17.22 billion while operating profits rose 5.8 percent to $5.78 billion. Chanel ended the year with 32,116 employees and 565 boutiques worldwide, of which 262 were dedicated to fashion.

“The name Chanel is so known globally. It’s such a strong brand, but we would just like people to know a bit more about who was behind that name, and why her name is still relevant today,” Cullen said.

“What’s fascinating to see is that she’s the person who comes up with all of these codes and subsequently, there have been fantastic people like Karl Lagerfeld and Virginie Viard who would take that forward.

“If you look at the suits from her later career, you can see they are based on the tweed suits from the early times. There is this idea of being able to move in your clothing, and the fact that the jackets are cut very high in the arms,” Cullen said.

She added that the shoe prototype in the exhibition is “very recognizably ‘Chanel’ throughout the decades. The heel might get thicker, and the toe might get rounder, but it’s always visibly a Chanel shoe.”

Cullen was also the curator of the 2019 “Christian Dior: Designer of Dreams” exhibition, one of the most successful in the museum’s history. She anticipates that the Chanel exhibition will also be a great hit.

“They’re the two great names in French fashion, and it’s so lovely to have a comparison. But they are different types of shows. We’ve had a really nice response so far. We’ve sold the most pre-sales tickets that the museum has ever sold in history,” Cullen said.