Mid-range officewear is particularly badly impacted by the cost-of-living problem, and Zara owner Inditex SA is battling to turn around a fall in earnings at its formal-wear company Massimo Dutti.
According to a report released on Wednesday by Inditex, the brand’s earnings fell 9.6% over the previous fiscal year. The only chain of the Inditex company that has not yet recovered from the pandemic is Massimo Dutti, whose revenue was €1.6 billion ($1.7 billion), or 16 percent less than the level of 2019.
In contrast to its six formats, which typically see strong growth, Inditex now finds itself in the peculiar situation of having a brand that is declining. As office workers adopt more casual attire and either choose high-end fashion labels or reduce spending aside from basic necessities, mid-priced formal apparel is struggling.
Massimo Dutti’s chief executive officer, Oscar Garcia Maceiras, claimed that the firm was especially reliant on Russia, where it closed all of its outlets in March. In any event, he added, “We have complete faith in Massimo Dutti as a commercial format. “They are moving the fashion proposition along really well.”
According to Bestinver Securities analyst Patricia Cifuentes, about one out of every ten Massimo Dutti stores were located in Russia. That, however, is consistent with the expansion of other businesses like Pull & Bear and Bershka.
At the end of January, the company had 548 locations worldwide, down from 766 at the beginning of the year. In all of its formats, Inditex has been closing underperforming stores, including numerous Massimo Dutti locations.
Hugo Boss AG, a German suit manufacturer, stated last week that inventories began to build up and provided a disappointing earnings estimate. Zalando SE, an online clothes store, has been altering its selection to highlight manufacturers at both price points.
It’s an odd one, Massimo; they ought to be well-positioned for many of the drivers during the past year, according to Credit Suisse analyst Simon Irwin.
Massimo Dutti could profit from this divide in fashion, according to AlphaValue analyst Jie Zhang, provided it can draw in affluent clients while adjusting to the “relaxation” of formal attire.
According to Inditex, Massimo Dutti intends to launch a linen collection this year.
