999
report1
annual
Financial highlights
3
Chairman’s statement
5
1999: a solid base for growth
8
International presence
11
Business performance
16
Board of Directors and Management Team
31
Financial Highlights 3
Chairman’s Statement 5
6
Once again I am pleased to present the Inditex Annual Report and to reiterate, in view of the details presented in the same, the commitment of all of us who make up this company to innovation and the meeting of new challenges.
The international expansion of the group in 1999 has continued at an intense rate. Inditex is present in already thirty countries, nine more than the previous year. This growth tests the capacity of our team to adapt itself to the particular characteristics of the different markets where we operate and to work at the same time with the global vision imposed by a complex, dynamic and ever more competitive environment.
This team of 14,000 professionals from different countries and cultures has as its main objective the growth of the Inditex group. Its daily task is marked by self-improvement and the continual search for new opportunities.
The increase in Inditex’s turnover, with an compound annual rate of 24% in the last five years, has been accompanied by upward evolution of the company’s results. The cashflow has tripled in this period. Business efficiency is also an expression of the quality of the management of our business, the complex network of activities of a vertically integrated fashion distribution group, which designs, produces and sells in three continents.
7
The future of Inditex is tied to our capacity to respond day by day to the demands of the market and to design and set in motion new projects which are capable of connecting with the desires of our clients around the world. The investment profile of the group permits it to have a solid base for future growth, for which the consolidation of our presence in Europe will be decisive, especially in key markets where we are already well-established, as well as in those where we have initiated our activity in the last two financial years.
This year, the year 2000, we are going to exceed the figure of 1,000 stores and new markets are going to be opened. We cannot limit ourselves to continuing on the path we have already opened and once again we will have to be enthusiastic and exacting in order to convert ideas and projects into reality in a world that is advancing at great speed.
AMANCIO ORTEGA GAONA Chairman
1 9 9 9 : a s o lid b a s e for growth 8
turnover 1999 338,607 m/pta
9
99/98
sales in stores
abroad
26 %
99/98
48 %
net income
flow
1999 34,070 m/pta 99/98
cash-
34 %
1999 53,031 m/pta 99/98 31 %
average number of
employees
1999 13,984
number of 1999
net income on sales 1999
10 %
stores
922
99/98
23 %
the turnover has
doubled in four years
10
I n t h e l a s t y e a r c l o s i n g 31 s t J a n u a r y 2 0 0 0 , I n d i t e x a c h i e v e d a c o n s o l i d a t e d t u r n o v e r o f 3 3 8 , 6 07 m i l l i o n p e s e t a s, 2 6 % m o r e t h a n t h e p r e v i o u s y e a r. T h e increase in its sales has been accompanied by parallel growth in net income, w h i c h r o s e t o 3 4 , 070 m i l l i o n p e s e t a s , 3 4 % m o r e t h a n t h e p r e v i o u s y e a r.
Sales abroad already make up 48% of the total, against 46% in the previous f i n a n c i a l y e a r. I n t h i s p e r i o d 9 9 n e w s t o r e s h a v e b e e n o p e n e d , 1 8 o f t h e s e in countries where the Group was not previously present, and the 75 stores of the Stradivarius chain acquired in November have been incorporated into t h e G r o u p . N e t i n c o m e o n t o t a l s a l e s i n s t o r e s h a s b e e n m a i n t a i n e d a t 10 % .
International Presence 11
12
North America
stores
Mexico
29
USA
6
Canada
1
South America
stores
Argentina
8
Brazil
3
Venezuela
3
Chile
2
Uruguay
2
Middle East Israel
stores
22
Saudi Arabia
3
Dubai
3
Lebanon
3
Japan
11
Kuwait
2
China
1
Bahrein
1
Number of stores at 31 January 2000
Asia
stores
300 new stores
in the last
three years
13
Europe Spain
stores 603
Portugal
97
France
59
Belgium
20
Greece
17
Sweden
6
Cyprus
5
UK
3
Turkey
3
Germany
2
Holland
2
Malta
2
Poland
2
Norway
1
14
Zara 395stores Massimo Dutti 180stores
Pull&Bear 203stores Stradivarius 75stores
Bershka 69stores
international sales will exceed 50% of total in the year 2000 15
five fashion
chains with nearly one thousand stores in 30 countries countries 1991 4
1992 5
1993 6
1994 8
1995 9
1996 10
1997 14
1998 21
1999 30
Business Performance 16
17 Sales in stores abroad (%)
Turnover
Sales in owned stores and franchises (VAT Excl.)
1999
338,607
332,843
48%
1998
268,665
253,818
46%
1997
202,565
191,020
42%
1996
167,795
155,882
36%
1995
143,617
133,969
30%
1995 1996
variation 99/98
26%
64%
31%
70% 30%
1997 36%
C.A.G.R. 95/99
24%
26%
58%
42%
evolution of sales in stores in Spain and abroad sales in Spain sales abroad
1999
1998
54%
52%
46%
48%
strong growth in the
last 5 years
18
In the last five years Inditex has maintained an average rate of growth in its s a l e s i n s t o r e s o f 2 6 % , r e a c h i n g 31 % i n t h e l a s t f i n a n c i a l y e a r. T h i s g r o w t h has been based on strong foreign expansion: in 1999, even with the effect deriving from the acquisition of the Stradivarius chain - with 69 of its 75 stores located in Spain -, foreign sales rose to 48% of the total. Five years earlier it made up 30% of th e total.
The acquisition of Stradivarius, with a good positioning in the market and with excellent prospects for growth, has contributed to Inditex achieving a figure of more than 90 million garments sold in 1999. 87% of the products sold were m a n u f a c t u r e d i n E u r o p e , l a r g e l y i n t h e G r o u p ’s o w n f a c t o r i e s . L a s t D e c e m b e r Inditex carried out the global launch of an exclusive cosmetic line for its Zara c h a i n , w h i c h s t r e n g t h e n s i t s c o m m e r c i a l p o s i t i o n a n d i t s p r o d u c t o f f e r.
19
34,314
Consolidated net income
1999
34,314
1998
25,440
1997
19,564
1996
12,131
1995
9,155
variation 99/98
35%
C.A.G.R. 95/99
39%
25,440 19,564 12,131 9,155
cash-flow
1999
53,031 53,031 40,578
1998
40,578 31,430
1997
31,430
1996
25,311
1995
18,679
variation 99/98
31%
C.A.G.R. 95/99
30%
25,311 18,679
33 .7% in c rease in n e t
i nc om e
in
1999
20
N e t i n c o m e - 3 4 , 070 m i l l i o n p e s e t a s - a n d c a s h f l o w - 5 3 , 0 31 m i l l i o n p e s e t a s - h a v e i n c r e a s e d b y 3 4 % a n d 31 % r e s p e c t i v e l y a g a i n s t t h e p r e v i o u s y e a r. T h e activities of Inditex in 1999 have generated an operative cashflow (EBITDA) of 68,298 million pesetas. The compound annual growth rate in net income in the last five years has reached 39%.
EBITDA
EBIT
Consolidated income before taxes
Net income for the year attributed to the controlling company
1999
68,298
49,194
48,652
34,070
1998
54,184
40,183
38,100
25,480
1997
42,194
31,858
29,583
19,532
1996
33,628
21,299
18,657
12,102
1995
29,028
19,485
15,388
9,093
variation 99/98
26%
22%
28%
34%
C.A.G.R. 95/99
24%
26%
33%
39%
21 consolidated shareholders equity
148,613 112,040 88,169 69,031
1999
148,613
1998
112,040
1997
88,169
1996
69,031
1995
51,241
variation 99/98
33%
C.A.G.R. 95/99
30%
51,241
total investment in the financial year
1999
70,213
1998
46,091
1997
21,400
1996
19,200
1995
25,802
variation 99/98
52%
C.A.G.R. 95/99
28%
70,213 46,091
25,802
21,400 19,200
capital expenditure reaching
increased by
52%
70,213 millon pesetas 22
T h e c o n t i n u o u s g r o w t h o f t h e c o m p a n y ’s r e s u l t s h a v e p e r m i t t e d i t t o a c h i e v e shareholders equity of 148,613 million pesetas in 1999. This figure represents a 33% increase against 1998.
The financial year 1999 stands out for its investment profile, with an i n c r e a s e o f 5 2 % w i t h r e s p e c t t o 1 9 9 8 . C a p i t a l e x p e n d i t u r e r e a c h e d 70 , 21 3 million pesetas which, in addition to the opening of 99 new stores and the acquisition of Stradivarius, has permitted the moving of the headquarters of Inditex to a new 55,000 m
2
building located in Sabón (Arteixo, A Coruña).
I n 1 9 9 9 s i g n i f i c a n t i n v e s t m e n t s h a v e a l s o b e e n m a d e a t To r d e r a ( B a r c e l o n a ) , where the central services and logistic facilities of Massimo Dutti and Bershka are located. With these investments, Inditex has a solid base from which to continue developing strong growth in the future..................
23
24
25
number of stores
922
Number of stores
Stores in Spain
Stores abroad
1999
922
603
319
1998
748
489
259
1997
622
433
189
1996
541
399
142
1995
508
391
117
variation 99/98
23%
23%
23%
C.A.G.R. 95/99
16%
11%
28%
748
622 541 508
around
150
new stores
in the
will be opened
financial year 2000
26
O n 31 J a n u a r y 2 0 0 0 I n d i t e x h a d 9 2 2 s t o r e s - 2 3 % m o r e t h a n o n e y e a r before - in 30 countries. In the course of 1999 nine new markets have been opened: Germany, Holland, Poland, Canada, Chile, Uruguay, Brazil, Saudi Arabia and Bahrein. Among them Germany stands out, where, after the opening of two stores in 1999, the opening of four more is envisaged for 2000. Some 150 stores will be opened in 2000, strengthening the emphasis on the European market with the entry of the Zara chain in Austria, Holland, Luxembourg and Denmark, amongst other countries, and increasing its presence in the countries in which it has recently begun operating.
more than
400,000 m 2 of
27
retail space
28
Net debt over shareholders equity
ROCE
Gearing (assets/ shareholders equity)
Rotation (supply/average stock)
EBT on sales in stores
Net income on sales in stores
ROE
1999
17%
26%
33%
2.0
5.92
15%
10%
1998
14%
25%
36%
2.0
6.45
15%
10%
1997
7%
25%
35%
1.8
6.77
15%
10%
1996
25%
20%
27%
2.0
7.20
12%
8%
1995
38%
19%
30%
2.3
7.61
11%
7%
29
13,984
average number of employees
1999
13,984 in Spain 8,529 abroad 5,455
1998
11,968
11,968
in Spain 7,637 abroad 4,331
1997
8,368 in Spain 5,897 abroad 2,511
1996
8,368
6,463
60%
in Spain 4,573 abroad 1,891
1995
5,627
6,463
in Spain 4,158 abroad 1,469
variation 98/99
variation 99/98
17%
64%
5,627
74% 26%
71% 29%
in Spain 12% abroad 26%
30%
36%
40%
26% in Spain 20% abroad 39%
70%
% in Spain % abroad
more than
14,000 professionals around
the world
30
I n 1 9 9 9 t h e G r o u p c r e a t e d 2 , 01 6 n e w d i r e c t p e r m a n e n t j o b s, a n d a s s u c h t h e average number of employees has increased by 16.8%, to a total of 13, 984. O f these, 5, 455 - almost 40% - work outside Spain.
The professionals who make up the Inditex Group play a central role in the growth and the international expansion of the group. Our commitment to this challenge and our capacity to rapidly adapt to an environment in continuous change permits the Group to face the opening of new markets with a guarantee of success.
Inditex is composed of professionals from a wide variety of cultures. One of its fundamental efforts involves the training of the high number of people w h o j o i n t h e g r o u p e a c h y e a r. T h e i n t e g r a t i o n o f n e w t e c h n o l o g i e s i n a l l t h e a r e a s o f a c t i v i t y o f t h e g r o u p - d e s i g n , m a n u f a c t u r i n g , l o g i s t i c s, c u s t o m e r service...- also requires a considerable effort in training. As a whole, this educational task is directed towards raising quality and professionalism in all tasks and fostering autonomy and responsibility in its management.
Board of Directors and Management Team 31
32
Board of Directors
33 C h a ir ma n
Amancio Ortega Gaona
D epu t y C h a ir ma n a n d CEO
Jose María Castellano Ríos
Memb er s of t h e b oa rd
Fernando Aguiar Maragoto José Arnau Sierra Carlos Espinosa de los Monteros Jose María González Quintián Francisco Luzón López Fernando Martínez López Rosalía Mera Goyenechea Josefa Ortega Gaona Sandra Ortega Mera Juan Carlos Rodríguez Cebrián Juan Manuel Urgoiti López de Ocaña
S ecr et a r y a n d Memb e r of the Board
Antonio Abril Abadín
34
Management Team
35 Deputy Chairman and CEO
Managing Director and Member of the Board
Jose María Castellano Ríos
General Counsel and Secretary of the Board
Antonio Abril Abadín
Administration and Systems Director
Fernando Aguiar Maragoto
Tax Advisory Director
José Arnau Sierra
Director of Finance and Management Control
Borja de la Cierva A. Sotomayor
Capital Markets Director
Marcos López García
Human Resourses Director
Jesús Vega de la Falla
Juan Carlos Rodriguez Cebrián
Expansion Director
Ramón Reñón Túñez
Real Estate Director
Fernando Martínez López
Corporate Communications Director
Diego Copado Fernández
Logistics Director
Lorena Alba Castro
E-commerce Director
Luis Blanc Juárez
International Director ZARA
Bernardo Sánchez Incera
Commercial Director ZARA
José Toledo de la Calle
PULL&BEAR Director
Pablo del Bado Rivas
MASSIMO DUTTI Director
Jorge Pérez Marcote
BERSHKA Director
Carlos Mato López
STRADIVARIUS Director
Jordi Triquell Valls