Wearing a black pantsuit and a Cartier watch, Marta Ortega weaved quickly through the gathering, clasping hands here, kissing cheeks there, her blond bobbed head nodding as she chatted, animated by the excitement of the event.
The party in October at a mid-20th century venue just a stone’s throw away from Louis Vuitton’s opulent flagship store on Paris’ Avenue des Champs-Élysées counted supermodels Naomi Campbell and Linda Evangelista among guests. As waiters glided by with bowls of shrimp curled in a basil-green sauce and roasted tomatoes, Christopher Michael, moderator of the industry podcast “What’s Contemporary Now?” said, “if you are someone in fashion you’re at the right place tonight because this is a space where you’ll find anyone who is anyone.”
Hosting the bash wasn’t a luxury major like Louis Vuitton or Dior. It was Inditex SA’s flagship brand Zara and the group’s 41-year-old chairwoman Ortega, an heir to her father Amancio’s $116-billion fortune from the retail empire he co-founded. The event — one of a series this year to mark the Spanish label’s 50th anniversary — was yet another effort by Ortega to push Zara into the rarefied world of high fashion, nudging it away from the “fast fashion” industry it spawned, one that evokes images of cheap products, sweat shops in developing countries and a large carbon footprint.
Her effort is driven in part by the rise in the more than $1.8 trillion global apparel market of players like China’s Shein and Temu that are undercutting chains including Zara, H&M, Mango and Gap by capturing younger, budget-conscious shoppers in a world drowning in clothes. At the same time, haute couture brands have hiked prices to stratospheric levels, in what’s dubbed “greedflation.” Ortega is eyeing a sweet spot between the two by seeking to sell pricier goods in fancier stores.
But as tariffs and the slump in discretionary spending crush sales growth at the world’s largest listed fashion retailer, the ambitious upmarket drive is turning into the first test for Ortega in her three years atop the group. Inditex’s first-half revenue rose a meager 1.6 percent, making it the worst such period since the company went public nearly a quarter century ago — not including the 37 percent plunge at the height of the pandemic in 2020. While operating expenses are growing faster than revenue, what’s worrying investors more is the absence of any obvious engines of sales growth.
“We’re definitely at something of an inflection point,” said Simon Irwin, a former Credit Suisse International analyst who now runs a consulting firm and has covered Inditex since its listing in 2001. “A lot of the drivers which drove huge increases in space productivity are seemingly now done, and it’s not clear to me where we go from here… Figuring out where growth comes from is quite challenging.”
Analysts still see Inditex as the sector’s gold standard, with a reasonable dividend yield and a solid balance sheet. The retailer — one of a handful of corporate world leaders from Europe alongside Airbus SE, LVMH Moet Hennessy Louis Vuitton SE and ASML Holding NV — has annual revenue just shy of €40 billion ($46.3 billion) and net income of almost €6 billion, giving it plenty of wiggle room. But growth concerns are mounting — a sales gain of about 4 percent is expected for the second half, a historically low number for Inditex.
Faced with a new market dynamic, the group is striving to strike the right balance between a finely tuned fast-fashion model that served it well for nearly five decades and Ortega’s vision of elevating the brand, conversations with more than a dozen current and former staffers, suppliers, industry experts and investors show. The executive told Spanish newspaper El Pais this year that it’s “not about selling more, but selling well and growing in a healthy way.” Ortega didn’t want to be interviewed for this article, while Inditex declined to comment.
“The reality is it’s still a company based on volume,” said Dana Thomas, author of “Fashionopolis: the Price of Fast Fashion and the Future of Clothes.” “As long as it has more than 5,000 stores worldwide, plus has its online business and is making gazillions of the same item and pushing it onto us en masse, as long as it’s a mass produced, mass sold, mass marketed product, it will never be exclusive and it will never be green.”
Ortega and 50-year-old Inditex Chief Executive Officer Óscar García Maceiras — appointed to the role in late 2021 — represent a generational shift at the group. Theirs is seen as a good working partnership, with García Maceiras, a lawyer by training, focusing on the nut and bolts of the day-to-day operations while Ortega builds connections and focuses on the brand’s image.
“She’s clearly very involved in product and marketing in a way that’s obviously very, very unusual,” said Irwin. “I can’t think of a single other company where the chair is so involved in the detail of the business particularly when it’s a non-executive role.”
Initially, the duo reigned over a phenomenal post-pandemic rebound in demand and continued with the main pillars of Inditex’s strategy: heavy investment in logistics and a revamp of the stores network, with fewer but bigger outlets in premium retail zones. Zara also sold pricier products and offered more limited editions — prices rose by 22 percent on average in Europe and 70 percent in the US over the last five years, according to market intelligence provider Retviews by Lectra.
Going Premium
In the three years to 2024, Inditex’s revenue rose about 40 percent and shares almost doubled. Profit increased to a third consecutive record of €5.87 billion — topping the combined earnings of Shein, Sweden’s Hennes & Mauritz (H&M) and the Japanese owner of Uniqlo, Fast Retailing.
But as the pent-up post-pandemic demand eased, sales began to cool. In the first semester this year, Inditex was hit by a weak US dollar. Zara, which is bundled together with Zara Home and low-cost brand Lefties and makes up more than two-thirds of Inditex’s revenue, saw sales rise just 0.8 percent.
“Inditex isn’t a value stock, it’s a growth one,” said Marion Cohet-Boucheron, a portfolio manager at Financière de l’Échiquier, which owns the group’s shares. “Sales will need to remain in the mid-to-high single digits,” she said.
After years of beating the industry’s loftiest expectations, the company’s stumble took investors aback, with shares suffering their steepest one-day drop in more than five years in March. The stock limped back up after sales improved at the beginning of the third quarter, but is still 2 percent lower this year.
“They’re going to have to continue to drive more productivity growth and that is very difficult to do,” Irwin said.
At the group’s headquarters in Arteixo, in northwestern Spain, weakening growth has created unease. It was met with a management reshuffle that saw Ignacio Fernández Fernández, former chief financial officer and a close confidante of the controlling family, step into a newly created role of chief corporate officer — effectively empowering a company veteran who rose through the ranks on 89-year-old co-founder Amancio Ortega’s watch to keep an eye on operations. The family owns about 60% of Inditex.
Amancio and his then wife, Rosalia Mera, created Zara in 1975, aiming to sell stylish, affordable clothes to the masses. It was the opening of the brand’s first store in the Big Apple in 1989 that prompted a New York Times reporter to coin the term “fast fashion” to describe what she said was a business catering to shoppers who “change their clothes as often as the colour of their lipstick.”
Short Shelf Life
Zara took off in the 2000s as Inditex embarked on an ambitious expansion and listed on the stock exchange. In Spain, it became a source of national pride. Its success also made it a case study for global business schools. Although Inditex added other labels along the way — Bershka, Massimo Dutti, Oysho, Pull&Bear and Stradivarius — Zara remains its mainstay.
What set Zara apart was its ability to spot trends, design new styles and get them rapidly into stores — a radical shift from the traditional seasonal calendar. Behind the scenes was a tightly managed supply chain and logistics network that allowed it to refresh stock weekly, keeping customers coming back for what was new. It was a model that defined a generation of retail, turning Zara into a global powerhouse and setting the blueprint for all its rivals.
Perceptions began to shift around the mid-2010s as Zara came to represent both a wildly successful retail business and a symbol of fast fashion’s environmental and ethical challenges. While still praised for its efficiency, the model seemed out of sync with emerging concerns about pollution, textile waste, greenhouse gas emissions and the working conditions of garment workers in developing countries. That sparked near-irreconcilable tensions at Zara: the company that pioneered the model began distancing itself from the industry it shaped, a trend that has accelerated under Marta Ortega.
From her desk deep inside Zara’s womenswear section, Ortega has been driving the upward push, attending fittings and meetings, drawing in celebrities and curating the brand’s image, company insiders say. Unlike her famously private father, she has adopted a more public persona, cultivating a web of relationships and channeling that cultural capital into A-list events and exhibitions.
In 2018, she launched Zara’s first “SRPLS” collection, a limited-edition line available online and through weekly releases in stores. Her second collection was shown during Paris Fashion Week at a venue used by the likes of Balenciaga and Givenchy and seemed like a declaration of her ambitions. Then came other premium lines like Zara Atelier and partnerships that became routine on its website and app.
“Many of these collections are just image tests,” said Pau Almar, a former Inditex staffer who’s now chief operating officer at Russian fast fashion brand Limé. “That’s a change in mindset; spending money on collections that aren’t really collections but advertising campaigns because that product isn’t selling en masse.”
The limited collections enlist high-profile photographers, stylists and creative directors — names more often associated with luxury. Although Zara avoids traditional advertising, it has poured significant resources into image-building with elaborate editorial shoots, cinematic campaign films and top models, paying them as much as €50,000 a day — well above some luxury houses.
When Jason Duzansky, a creative director who counts Chanel and Louis Vuitton among his clients, worked on a photo shoot this year for Inditex in a New York studio, he was surprised by the free rein he was given. Over three days, renowned photographer Steven Meisel and 50 fashion models participated in the project to produce a two-minute film. Ortega herself helped pick the soundtrack, Donna Summer’s hypnotic “I Feel Love,” Duzansky said.
Photographer Mario Sorrenti, a friend of Ortega’s and a collaborator on Zara’s latest 50-year anniversary collection, recalls the seemingly limitless budget. “There was no holding back on their part,” he said.
Zara also plowed money into transforming its flagship stores. A chunk of Inditex’s annual €1.8 billion capex is going into rolling out a new store design seen in locations like Madrid, Las Vegas and Shanghai.
The new store concept was inaugurated three years ago at Madrid’s Plaza de España — a 7,700-square-meter, four-storied temple to fashion, with curved partition walls and floating shelves giving the space a soft geometry. The design evolved even more, with its latest iteration on another Madrid high street, Calle de Serrano, introducing “El Apartamento,” a curated, home-like space blending clothes, furniture and a café.
But it’s not clear how far Zara’s upmarket push can carry the company as tailwinds fade, or how Inditex can square its mass-production model with its sustainability goals.
Inditex last year accounted for nearly 10 million tons of CO₂ equivalent, a measure of all greenhouse-gas emissions. Transport-related emissions rose 10 percent in 2024, as Inditex relied on air freight to maintain its tightly managed inventory and quick-turnover model.
Off Pace for Net-Zero
Ortega, who rejects the group’s fast-fashion label, has argued that it just matches supply with demand, minimizing inventories and unsold items. That claim is “somewhat misleading,” said Ken Pucker, a professor at Tufts University’s Fletcher School of Law & Diplomacy and former chief operating officer at apparel maker Timberland.
“In fact, Zara and other brands’ speed and newness is more about stimulating demand than responding to it,” he said.
Industry observers see Inditex’s attempts to shift its game upwards as effectively an effort to have its cake and eat it too. While it’s pushing its image and prices upwards, it’s leaving its production model largely intact. Fashionopolis author Thomas calls the company’s efforts little cosmetic tweaks that “aren’t systematic changes.”
But little of that seemed to be on the minds of those at the Paris party in October, which displayed a collection of clothes, bags, accessories and other goods by 50 renowned creators — including Pierpaolo Piccioli’s hot-pink surfboard and a mirror by singer Robbie Williams. As the night wore on, miniature desserts were served and guests posed for photos. But Ortega continued to walk the floor, helping visitors place pre-orders for the products on display — a quiet reminder that even in celebration, business never stops.
By Clara Hernanz Lizarraga
