In the background, Inditex heiress sets tone for Zara revamp

A year into chairing the world's biggest fashion retailer, Marta Ortega is trying to shake up Zara owner Inditex's fast-fashion image and draw in more aspirational shoppers, according to analysts and investors.

That strategy has already helped Inditex grow sales and profits as the retailer passed on higher costs to consumers through price increases.

Inditex completed a leadership reboot and generational handover when Ortega, the youngest child of founder Amancio Ortega, became non-executive chair on April 1 last year, just a few months after Oscar Maceiras took over as CEO.

Amancio Ortega set up the first Zara store in A Coruna in the north west of Spain in 1975. The group now includes seven brands, including Pull&Bear and Bershka, but flagship Zara accounts for 73% of sales.

Marta Ortega started from the bottom at Inditex, stacking shelves at a Bershka store when she was 23.
Her appointment was initially met with scepticism, but since the 39-year-old started in the role, Inditex shares have risen around 50% and the company reported its strongest ever year of sales in 2022.

Like other publicly listed family-owned companies, Inditex must strike a balance between the family's interests and a robust corporate governance structure that shareholders can trust.

Inditex's leadership transition has gone smoothly thanks to the Ortega family entrusting the day-to-day running of the company to professional executives, according to Josep Tapies, professor at IESE Business School in Spain. But some shareholders would like more insight into Ortega's thinking as chair.

"As an investor, we'd never get to meet Marta, which I think is a pity," said Ann Steele, portfolio manager at Columbia Threadneedle.

"We hear a lot that she's interested in the growth of online, in stretching the brand, but we don't get the opportunity to sit down with her and discuss that."

Maceiras, a lawyer who was formerly general counsel at Inditex, told reporters his relationship with Ortega was "fluid and trusting".

Ortega, whose father owns 59.3% of Inditex, has mainly worked in the background, leaving the spotlight to the CEO. An Inditex spokesperson said that she has focused on "defining Zara's brand and product strategy". Ortega declined a request for an interview.

A source close to the company said Ortega has been "central" in accelerating Inditex's "high-fashion" strategy over the past year.

"We feel that Marta Ortega has repositioned Zara slightly upwards," said Patricia Cifuentes, analyst at the investment banking arm of Spanish investment firm Bestinver.

"Reinforcing that Zara sells fashion, not just clothes, has allowed Inditex to increase prices and protect the margins amidst the inflationary storm."

As price-sensitive shoppers were squeezed by inflation, Inditex has targeted the well-heeled, raising prices and investing more into flagship stores in prime locations, such as Paris' Rue de Rivoli while shutting smaller stores.
This year it plans to replace hard security tags with RFID tags sewn into garments, a shift that will cut self-checkout times and reduce queues and crowds in stores.

The strategy has paid off. Some investors say gambles like that are more easily made when families, with one eye on their legacy, are involved.

"The importance of the family is that it ingrains a long-term mindset in the business," said Alistair Wittet, portfolio manager at Comgest in Paris, which holds Inditex shares.

"That frees up management to not worry about having to deliver very short-term results at the expense of long-term decisions."

Maceiras has refused to say whether Inditex will hike prices further this year. In a reply to Reuters' questions, Inditex said it is focused on "the highest quality at affordable and stable prices".

Ortega hinted at her ambitions for the company in Inditex's 2022 annual report, writing: "We don't want to be fast; we want to be agile and flexible." That is a departure for the company seen as a fast-fashion pioneer and known for getting new styles into stores at high speed.

Ortega's personal projects also dovetail with Inditex's attempt to be seen as more upscale. Last year, she created an art and fashion foundation with an exhibition space in her hometown of A Coruna, where Inditex has its headquarters.

The MOP Foundation, after her initials, in November opened an exhibition of photos by renowned fashion photographer Steven Meisel.

Meisel, whom Ortega knows personally, has shot 13 campaigns for Zara since 2017, in a departure from his usual roster of luxury clients including Dolce & Gabbana and Versace.