Spanish fast-fashion king Inditex shook up the apparel market Tuesday with the announcement that longtime boss Pablo Isla would be stepping down from his role as executive chairman and relinquishing his power to two people within the organization.
His chairman role will go to Marta Ortega Pérez—the daughter of Zara founder and Spain’s richest man, Amancio Ortega—as of April, while the chief executive position will go to general counsel Óscar García Maceiras, effective immediately.
The news of Isla’s step down sent shares in the parent group Inditex, which besides Zara owns brands including Massimo Dutti, Stradivarius, and Pull&Bear, sliding by up to 5% in morning trading.
The market’s worry about new leadership can be chalked up to Pablo Isla’s deft touch during his 17-year tenure at the company. With Isla at the helm, Inditex’s market value grew sixfold to $100 billion, and his early integration of digital and physical shopping at Zara allowed the fashion giant to return its revenue and profits to pre-pandemic levels before its rivals. Since June 2020, Zara has also invested $3 billion into tech, fitting radio-frequency identification chips into each article of clothing to digitize the company’s famed demand-oriented approach which can bring clothes from design pads to the rack within 15 days.
But even as Inditex finds itself in a stronger position than rivals, some analysts worry that high inflation, supply chain tangles, and a slowdown in China’s economy will hurt sales, perhaps making Isla’s exit another example of his impeccable timing.
Newcomers in new times
The transfer of power in Inditex comes along with some Spanish caveats. In Spain, company chairs (especially in family-run firms) often have executive control of the company, while the CEO acts more as a head of operations.
In Inditex’s case, Pablo Isla, who has been executive chair since Amancio Ortega stepped down as chairman in 2011, is handing off the chairman title, but not executive control to Marta Ortega, while giving executive power to Óscar García Maceiras, who has only been with the fashion house for eight months. The former CEO Carlos Crespo, who has been in this role since July 2019, will take the title of COO, which is essentially the role he was already playing.
“His role has hardly changed,” comments Anne Critchlow, retail analyst at Société Générale on Crespo’s new title. “In terms of the actual management of the company and its concepts, there is strong evidence of continuity.”
Critchlow adds that while Isla’s departure came earlier than expected, Marta Ortega appears to be well respected in the business after spending 15 years in various positions at Inditex, including working as a sales assistant at a Zara shop in London. While never in a top management job, she has strengthened the commercial side of the business by creating several premium collections in women’s wear.
Inditex is also creating a management committee, made up of executives from different business areas, as it moves from iconic founder to daughter.
The changeover comes at a difficult time for retail businesses with sprawling supply chains, however. In an October report, the European apparel retail group at Bank of America downgraded H&M stock to underperform, where it joined Inditex. “We become even more cautious on the European apparel retail sector after assessing the risks arising from supply chain disruption and cost inflation,” they noted, citing potential delays in product delivery owing to port congestion and transport disruption, higher freight rate costs, raw material price inflation, and manufacturing wage inflation.
For her part, Société Générale’s Critchlow suggests that Inditex will suffer fewer supply chain and inflation issues than others. “While no retailer is immune to supply chain challenges,” she told Fortune, “Inditex’s ‘proximity sourcing,’ with 60% of product sourced close to home from Spain, Portugal, Morocco, and Turkey, is a favorable business model at this time. Inditex should not have a problem securing sufficient inventory.”
Additional reporting by Ian Mountin Madrid.
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