Zara nine store roll out triggering lower profits in Australia

The global fast-fashion giant Zara’s local offshoot is highly profitable. But the financial results for the Australian stores suggest the initial queue forming, love affair was moderating, according to the Australian Financial Review.

Spain’s retail juggernaut has nine Australian outlets.

Documents lodged with ASIC show Zara’s revenue rose 32% to $141 million for the 12 months to 31 January, down on the 56% revenue growth recorded in 2013.

The documents reveal the first earnings dip since its 2011 arrival with the 2014 profit down $1.52 million, some 8.5%, to $16.46 million.

Costs escalated as its store roll-out triggered administration costs up 146%.

The cost of goods sold are increasing ahead of sales.

Macquarie Private Wealth obtained Zara’s financial results noting average sales per Zara store had continued to fall since it first entered the market, down from $42.8 million in 2012, to $25.8 million in 2013, and most recently to $18.2 million in 2014.

‘’It also appears that the initial stores have been more productive than the later stores, potentially highlighting store maturation, increased competition from other new entrants including Topshop,’’ Macquarie suggested.