Zara Australia Loses Big Aussie Investor

Previously, Zara Australia was 90 percent owned by its Spanish parent, Inditex and 10 percent by Solomon Lew’s son, Peter Lew. In a surprise move, Lew’s business, International Brand Management transferred its 10 percent stake in global fashion retailer, Zara, with Lew also stepping down from the board.

This transfer appears to bring an end to what was an 18-year relationship between the Lew family and Inditex.

The Lew’s originally purchased a 20 percent stake in the company 11 years before the first Australian store opened in Sydney. In December 2015, the family parted with 10 percent of its original stake in the business during a share issue to the tune of $19 million. The transfer of the remaining shares on April 30 also coincided with a share issue of $15.5 million, reports the AFR.

Through its stake in Zara Australia, the Lew family was not only able to soak up the financial benefits of the Spanish retailer’s rapid Australian growth, they were also able to gain insight into one of their major local competitors.

Spectators have long questioned the Lew family’s stake in Zara Australia, as the family also owns Seed, Thurley and local licenses for FCUK, French Connection and Nine West. Through Solomon Lew’s 42 percent ownership of Premier Investments, the family has large stakes in Dotti, Portmans, Jacqui E, Just Jeans, Peter Alexander, and a 10.8 percent stake in Myer, all of which are in direct or indirect competition with Zara.

The Lew's sell shares in Zara Australia
The Lew family have sold their shares in Zara Australia, amidst share issues and slowing sales.

Zara is still taking market share in Australia; however, its growth has slowed as earnings went backwards for the year ending January 2018. In 2016, Zara’s sales grew by 24 percent, this figure shrunk to 15.5 percent in 2017, and 9.9 percent in the company’s latest accounts that were lodged with ASIC this week.

According to these accounts, gross margins have slipped from 57.2 percent to 55.1 percent, while selling and administration costs jumped up by eight percent. Pre-tax profits also slipped to $12.8 million, and net profit to $8.9 million, which was a reduction of 11.7 percent and 13.6 percent respectively.

According to Macquarie Equities, sales per store for all International fashion retailers, including Zara, H&M and Uniqlo, are all falling, as declining foot traffic in shopping centres and heavy discounting pressure starts to take its toll.

This news comes after Zara Australia officially launched its Aussie e-commerce store on March 14, which saw dozens of fashion brands dropping piles of cash into search advertising in a bid to compete with the Spanish-fast fashion retailer. The opening of Zara’s online store is expected to give the brand’s local presence a boost in traffic and revenue.

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