Closure of Russian shops presents challenge for new head of Zara owner Inditex

Spanish company has more than 500 stores in Russia, all now temporarily closed in response to the war in Ukraine

New Inditex chair Marta Ortega is the daughter of Inditex’s founder Amancio Ortega.

Marta Ortega will start her job as chairwoman of her father’s retail empire Inditex next month with an unenviable task: dealing without Russia, the Zara owner’s second-largest market in terms of stores.

Her predecessor, Pablo Isla, is leaving the company after spearheading Inditex’s expansion over 17 years.

He paid a special emphasis to Russia, where the Spanish company has more than 500 stores, more than any other country besides Spain. Now, those are all temporarily closed in response to the war in Ukraine.

Ms Ortega, the 38-year-old daughter of Inditex’s founder, faces a laundry list of challenges besides Russia.

Inflation and supply chain challenges are dimming the outlook for this year, while the resurgence of Covid in China threatens to weigh on consumption in another key market. 

Meanwhile, cut-rate price online retailer Shein Group is steadily becoming a bigger competitor even as Inditex has been pumping €1bn into its own e-commerce business.

Spread of Omicron

Inditex said the spread of Omicron wiped €400m off of earnings during its key Christmas quarter. The shares fell as much as 2.2%, having lost about a quarter of their value since late November, when Inditex replaced its chief executive with Oscar Garcia Maceiras and announced Ms Ortega would become chairwoman.

Investors have been concerned the new management doesn’t have the same track records as their predecessors. Mr Isla spearheaded the company’s expansion, and the shares quintupled since he became CEO in 2005, making founder Amancio Ortega richer than Warren Buffett at one point.

Mr Isla later ceded the CEO position but has been leading the company as executive chairman. Marta Ortega’s role will be a non-executive one.

Ms Ortega has spent a decade and a half at Inditex in various jobs, though never a top management position. She’s been most involved in strengthening the brand of Zara, where she introduced a collection with Charlotte Gainsbourg and a premium line called SRPLS, adding a veneer of glamour to a chain that focuses on selling affordable fashion.

Mr Garcia Maceiras never held a CEO position previously, unlike Mr Isla, who headed Spanish tobacco company Altadis before joining Inditex.

Inditex aims to reopen stores in Russia when possible, Mr Garcia Maceiras said. The Russian government has threatened it may nationalise businesses that are suspended in the country. The stores are leased, and Inditex continues paying employees. The company has also shuttered about 85 shops it runs in Ukraine.

Sales rose 36% in the year through January, the fastest pace since Inditex’s IPO two decades ago, largely due to the bounce-back from the pandemic. Annual revenue of €27.7bn means Inditex is a bigger company, making it harder to achieve growth rates of the past.

• Bloomberg