Zara Case

3845 Words Nov 24th, 2011 16 Pages
1. With which of the international competitors listed in the case is it most interesting to compare Inditex's financial results? Why? What do comparisons indicate about Inditex's relative operating economics? Its relative capital efficiency?

We think H&M’s financial results are the most interesting one to compare with Inditex’s. H&M is the most important and largest competitor of Inditex and due to their similar background, both being large international European apparel brands and offers fashionable clothing with in season style.

We have notice and quoted from Exhibit 6, their net operating revenues, aka their sales, are more alike when compared to Gap and Benetton; and their net incomes are also similar. The negative ROE in Gap,
…show more content…
1 Comparative Operative Margin Analysis

Remarks of the table:

Markdown = Markdown price x percentage of goods that needed to be marked down -

Representative Competitor: 0.3 x (0.3+0.4)/2 = 0.105 = 10.5%

Zara: 0.15 x (0.15+0.20)/2 = 0.02625 = 2.6%

Manufacturing Costs/ Selling Price are assumed to be half of the RSP

As seen from the table, we can see that the largest differences between Zara and other competitors are the lower markdown percentage and the lower advertising expenses.

The lower markdown percentage is mainly because of Zara’s strategy on risky items due to design mistakes, which may lead to large number of inventory. If any Zara’s product was slow to sell in one

More about Zara Case

Open Document