Zara is homing in on Britain with launch of new furniture outlet

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Spain's clothes retail giant Inditex, the parent company of the Zara clothes chain, is planning to launch its home furnishings line Zara Home into the UK this year, the chief executive Pablo Isla said yesterday.

The move reflects the company's continued confidence and plans for growth in the "especially competitive" British market, he said.

Britain's first Zara Home store will open in a prestigious site in London's Regent Street. "This marks an important expression of our expanding operation in the UK, since Zara Home represents a flagship project for us," Mr Isla said.

He was speaking at Inditex's headquarters in Arteixo, near the northern Spanish city of La Coruna, the design and distribution centre for all Zara's clothes sold worldwide.

Mr Isla announced a 21 per cent increase in Inditex sales for 2005, from €5.57bn to €6.71bn. Gross margins were 23 per cent and net profit rose 26 per cent to €803m in 2005, compared with €638m in 2004. The latest figure eclipsed first-quarter figures from its Stockholm-based rival Hennes & Mauritz which disappointed analysts with a rise of just 11 per cent.

Inditex announced a 40 per cent increase in dividend for shareholders. Mr Isla said the company planned to devote 50 per cent of profits to dividend payments and 50 per cent to new investments. Some 34 per cent of shares are publicly quoted. The rest remain in the hands of the company's reclusive president, Amancio Ortega - Spain's richest man - and his family.

Inditex plans to open 410 to 490 stores next year and step up investment in new shops by up to €850m. "This ambitious plan of growth and investment will guarantee the future of the company in coming years," Mr Isla said. He attributed the international success of the group's "rapid fashion" formula to its "absolutely avant-garde" computerised system of design and distribution.

The opening of Regent Street's Zara Home will mark the debut of a line the company is rolling out worldwide with much fanfare. Last year Zara Home opened 48 stores internationally, and plans to open up to 45 in 2006. The group, which includes the successful teenage fashion chains Bershka and Oysho, opened 448 new stores in all.

The opening date for the Regent Street store has not been fixed, and depends on when the building is available. Zara, which uses window displays and shop fronts as almost its sole means of advertising, chooses its sites with care. It likes to locate its stores alongside luxury designers who charge higher prices.

Italy, France, the UK and Germany continue to be the main growth areas, but the company plans ambitious growth and expansion in Asia and the Pacific region.

Results in the UK continued to be "very satisfactory," Mr Isla said, although he acknowledged that the British market was "very developed". He declined to comment on cut-throat price competitors in the British market, but said prices "eased slightly" worldwide by about 5 per cent. More branches of Zara will open in Britain in 2006, he said.

A Zara spokeswoman said it could withstand pressures from low-cost competitors "because we compete not just on price but on quality - we sell the latest designs at accessible prices". She added the UK market is one of the most competitive in the world.