Spanish fashion chain Zara, which is currently looking for a major store in Dublin, has made a sparkling debut on the Madrid stock exchange, making founder Amancio Ortega and his family £1.5bn sterling (#2.2bn) richer. Shares in Zara's parent company, Inditex, jumped 22 per cent to #11.2bn (£6.7bn), giving the 25-year-old chain a market value almost as great as the 117year-old Marks & Spencer.
The reception confirmed expectations for the float of a company whose innovative production process and successful stores are marking out the future for the sector in Europe.
Zara has revolutionised much of the European fashion scene. In a Berschka clothes store in La Vaguada, one of Madrid's most popular shopping malls, teenage girls gossip and try on hotpants, glittery platform shoes and tight-fitting, baby pink tops.
Not far away, in a corner of the same mall that houses three Zara stores, a slightly older group of fashion shoppers are forming long queues by the cash tills. There is a Zara each here for men, women and children. A second women's Zara is just 50 metres away, presumably to cope with the overflow. The mall also boasts an elegant Massimo Dutti, selling smarter clothes for men and women, and a Pull&Bear, with cheaper clothes for young men.
Put these seven shops together and you could make a department store. They are all owned by one man, Amancio Ortega, an elusive, billionaire retail genius whose Spanish Inditex company floated 26 per cent of its stock on the Madrid exchange last week. The Inditex float would be a mainly Spanish affair were it not for the fact that Mr Ortega, whose empire reaches 33 countries, has been hailed as the future king of global fashion retailing.
This 65-year-old, balding former designer of women's housecoats is, at first sight, an unlikely candidate for the title. But the figures speak for themselves. Inditex, created in 1975, doubles its store numbers, sales and profits every three years. Ortega's 1,000 stores and five chains, which include the recently acquired 100-store Stradivarius women's chain, now sell more abroad than at home. Last year they turned in £140m sterling profit on sales of £1.4bn.
"Zara is possibly the most innovative and devastating retailer in the world," says Daniel Piette, fashion director at France's LVMH luxury goods group.
Mr Ortega's rise comes as old retailing formulas enter into crisis - La Vaguada's Marks & Spencer, for example, will close later this year.
Inditex's shares are proving as popular as its clothes. The float price of #14.70 valued the company at £5.6bn, on a par with Marks & Spencer and Hennes & Mauritz. The float was over subscribed 53 times; in Madrid's last flotation, the airline Iberia modestly covered a #2.2bn (£1.3bn) float. Analysts already talk about Inditex as a candidate for the market's Ibex35 index.
The secret is simple. Zara, the stores that turn in 77 per cent of the group's sales, are the most agile and the most cost-effective shops on Europe's high streets.
A team of 1,000 designers and a production system designed to get new models from the drawing board to the shop rail in two weeks permits a lightning response to fickle fashion tastes the world over. They call it "live fashion", and churn out 10,000 new Zara styles a year.
"There isn't another retailer that can do that," according to Richard Hyman of the Verdict retail consultancy. There is no brash self-promotion, no fashion posturing at Inditex. It does not even advertise. Instead it bombards the market with new styles, dropping ones that do not sell and mass-producing ones that do.
Ortega believes advertising is a pointless distraction from making clothes people want to buy. When a famous Spanish actress asked to do a photo shoot in one of his shops, Ortega said no. "You haven't got the idea yet, have you?" he told the newly appointed executive who dared suggest it would be good for the Zara name.
Jose Maria Castellano, a former computer company executive and Ortega's right-hand man, has called this the "democratisation of fashion".
Customers are treated like political focus groups, their tastes minutely monitored and instantly responded to.
Stores are the front line. The feedback they send to La Coruna drives the design machine. This is not just a question of the computerised sales data sent from shops as they close every evening. Sales assistants ring designers, and tell them what customers are saying. If shirts are the right design, but the wrong colour, the designers are told. Within a few days new styles should be on the shop floor.
Zara, the vast commercial machine, responds more quickly to street fashions than the industry's designer legends - who take months to get a new concept into a shop.
The Inditex headquarters sits in a grim industrial park in Sabon-Arteixo, outside La Coruna, in the rainy north-western region of Galicia. The Inditex machine is driven by the acres of charmless factory space surrounding it - where freshly made clothes spin around 200km of rails.
Control over the production process is absolute. Inditex does everything but the sewing. It designs, selects and cuts the cloth, sending it out to workshops and cooperatives in northern Portugal and Galicia for stitching.
It then finishes the clothes back at Sabon. Twice a week the business park resounds to the growl of Zara trucks as the company sends new deliveries to every shop. Zara junkies know the delivery routine and can be found waiting for stores to open, keen to be the first to snap up a new style.
The workshops and cooperatives are crucial. Their cheap, flexible labour keeps production and storage costs down - helping Inditex achieve a 10 per cent net margin after tax. That compares to 8.4 per cent at rivals H&M and only 6.4 per cent at Gap.
Control over the entire Zara operation is obsessive. One corner of the Sabon estate contains a miniature mall. There are entire shops - Zaras, Pull&Bears and the rest - whose trademark interior designs are developed here. There are also rows of mock shop fronts - designed to give Zara a uniform look the world over.
Inditex, which now has 24,000 employees, is showing the same sort of agility with its fashion chains as it shows with its clothes. Three years ago, Bershka was just another Inditex idea. Now it has 104 shops in five countries and annual profits of £2m.
Not all ideas are successful, but, as with bad designs, Inditex seems to drop them quickly and quietly. Chains with names like Brettos, Kiddy's Class and Lefties - once trumpeted as the new Inditex thing - have all but disappeared.
A takeover of Adolfo Dominguez, a fellow Galician whose upmarket, quoted fashion house was helped out by Ortega when a fire damaged its warehousing recently, is often talked about - and denied by both sides. A chain of lingerie stores, named Oysho, is due later this year.
For the foreseeable future Zara will continue to drive Inditex. The chain has reached near saturation in Spain but there is plenty of room for growth abroad. There are 65 Zaras in France but Britain and Germany have only seven each. Italy and Ireland have none but it seems likely that Dublin may have one before the end of the year. There are only nine in the US and Canada.
Trailing in the wake of Zara, Britain and the rest of Europe can expect an invasion of Bershkas and the other chains. Perhaps, one day, Manchester's Trafford Centre and Kent's Bluewater - which each have Zaras - will have as many Inditex stores as La Vaguada. If that happens, Mr Ortega will have earned his place as fashion retailing's undisputed king.
