ZARA HAS FOUND ITS NEW HEIRESS
2022 JANUARY ISSUE
Written by : Andrew Sia
Zara has always been a very good case study for business although I am not a fan of Zara and definitely don’t find myself in any of the fast fashion arena. Especially in today’s business climate where the sustainability is very much emphasized. We have a lot of room to study how to improve our industry’s performance and to “buy less” and to “buy better” has always been something that I have been emphasizing.
Its founder, Amancio Ortega, is already at 85 and for him to find his successor is something that the shareholders are also anxious to know.
This time he picked his daughter, Marta Ortega, who has been with the company already for 15 years. But there is this Pablo Isla, who Amancio picked 15 years ago, and since then he has been the chief executive of Inditex.
Then there is Oscar Garcia Maceiras, the general council who just joined the company.
We have to see how it goes and especially now it is running under the business environment that is affected by the Omicron, and for the country like Spain it is being the most affected. We have to see how Zara can sail itself under this storm.
There is this very big question hovering over Inditex, the world’s largest clothing retailer, that is what will happen when Amancio Ortega goes?
Amancio Ortega, the founder, is now 85 years old and he is Spain’s biggest and best-respected company. Although he stepped down as the chairman 10 years ago, he still comes back every day to its headquarters at the outskirts of A Coruña, in the region of Galacia on the coast of the Atlantic. He still holds a majority stake and it makes him the country’s richest person.
The Inditex board just announced at the beginning of December that as of April 1, 2022, Ortega’s 37-year-old daughter, Marta Ortega, will take over the chair of the Inditex.
On the date of its announcement, it prompted a share sell-off which resulted the falling of 6% in Madrid’s stock exchange.
Marta Ortega worked discreetly in the group for 15 years and started to come out and gives interviews. She shows her primary interest in the Zara Woman collection which accounts for almost 70% of Inditex’s sales.
People starts to see an impatient scion of a business dynasty elbows aside a professional who has successfully managed the group. And in fact it is referring to Pablo Isla, who oversees the Inditex’s capitalization multiplied six-fold and rated highly by Harvard Business Review as the world’s top performing chief executive.
It is only a natural process for a father to hand over his rein to his daughter in this way when the time comes. And this is a typical story of not only the Spanish family businesses, but also internationally.
The company denied any such characterization and argued that it is not really the case of Marta taking over from Pablo. Pablo Isla will remain as executive chair. It continues to say that Marta would not be executive chair, and Inditex would adopt a more “Anglo-Saxon” corporate governance model.
A new role, the leading executive role will be taken over by Oscar Garcia Maceiras, the general counsel and secretary of the Inditex board, immediately as chief executive.
Here is a bit about the background of the family as we all know that Amancio entered into his second marriage, but his original wife remained in the business until she died in 2013.
When Marta was born, Amancio was still married to his first wife, Rosalia Mera. It was Rosalia who helped him to start the clothing business and at that time Inditex started making gowns and lingerie. Until the birth of Marta, Rosalia wasn’t aware of Amancio’s relationship with Flora Pérez, who was Marta’s mother.
Today, Pérez, the second wife of Amancio, represents the family’s 60% shareholding on the Inditex board. Two of Marta’s brothers, and also Marta’s husband, are working in Zara.
But the older half-sister of Marta, doesn’t work in Inditex and on Mera’s death in 2013, it was estimated her fortune to be at €6.3 billion.
People will wait to see how it goes as it is getting really big already and with the interweaving of family’s different interests, would Inditex be steered on its course as the last ten years? At this moment no one has the answer.
For the company’s nine months to October 31, Inditex reported €19.33 billion in sales, an increase of a 37% increase on the same period in 2020 and a 10% increase on the same period in 2019. This is before the coronavirus crisis.
It announced the net profit of €1.23 billion for the quarter to October 31 as sales surpassed pre-pandemic levels and it shows the group’s recovery from the early stage of the pandemic. But its share prices fell as the new variant, omicron, has cast the doubt that it may derail the group’s rebound. The share price has fallen by 12% over the past month.