For financial advisers and professional investors only – not for distribution to retail investors.
November 19, 2024
This content has been produced by Walter Scott & Partners Limited (‘Walter Scott’).
Global fashion retailer, Inditex, was first bought for Walter Scott clients in 2001 – and has been owned in the Walter Scott Global Equity Fund since its inception in 2005.
Inditex, with flagship brands Zara, Massimo Dutti, Bershka, Pull&Bear and Stradivarius, is one of the very few stocks that Walter Scott bought at IPO. The appeal, and the remarkable success of the business, has been underpinned by its differentiated supply chain. Unlike peers who typically source products through Asian suppliers, Inditex procures a majority of its garments locally: this has allowed the company to be far nimbler than its competitors when dealing with evolving fashion trends – thereby avoiding painful mark downs. While this was a key part of our rationale for purchasing the stock, what has also impressed is the extent to which this nimbleness has allowed the firm to adapt to changing economic circumstances. As well as delivering excellent growth, it has proven remarkably resilient in the face of economic shocks – a key attribute that Walter Scott looks for in investee companies.
Despite enjoying a remarkable degree of success over the 20+ years since first purchase, Walter Scott believes the company still has significant scope to grow. This, paired with its proven resilience, underpins its continued inclusion in the Walter Scott Global Equity Fund.
In this Digging Deeper conversation, Head of Research Alan Lander from Walter Scott shares his thoughts on why Inditex is different.
Key takeaways:
Inditex has a differentiated business model: putting the latest fashion in consumer hands when they want it
- Proximity sourcing: most manufacturing occurs near head office (Spain, Portugal, Morocco, Turkey)
- Speed to market & flexibility: weeks from production to stores, can be responsive to seasonal market trends
- Low store inventory: twice-weekly deliveries to stores from Spain, meaning more sold at full price
- Design & pricing: data driven from head office in Spain, quality fashion at affordable price
- Response to online retail: pivot to less, larger stores in premium locations, plus investment in online
- Profitability & growth: better store productivity, 40% volume growth in last 5 years, in 90+ countries & room to grow
- Ownership: family-owned, long-term focus
The Walter Scott Global Equity Fund is designed for consumers who:
- are seeking capital growth and income distribution
- are intending to use the Fund as a core component, minor allocation or satellite allocation within a portfolio
- have a minimum investment timeframe of seven years
- have a high or very high risk/return profile for that portion of their investment portfolio, and
- require the ability to have access to capital within one week of request.
The Target Market Determination (TMD), available at macquarie.com/mam/tmd, includes a description of the class of consumers for whom the Fund is likely to be consistent with their objectives, financial situation and needs.
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The Fund(s) mentioned above may have multiple classes of units on issue. A separate class of units is not a separate managed investment scheme.
This information has been prepared by Macquarie Investment Management Australia Limited (ABN 55 092 552 611 AFSL 238321) the issuer and responsible entity of the Fund(s) referred to above. This is general information only and does not take account of investment objectives, financial situation or needs of any person and before acting on this information, you should consider whether this information is appropriate for you. In deciding whether to acquire or continue to hold an investment in a Fund, an investor should consider the product disclosure statement for the relevant class of units in a Fund, if any, and the Website Disclosure Information available at macquarie.com/mam or by contacting us on 1800 814 523.
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