Zara plans to close more than 1,000 stores to focus on e-commerce

The Spanish clothing retailer is shifting its focus to online shopping amid the coronavirus crisis.

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/ Source: TODAY
By Rachel Paula Abrahamson

Zara, the fashion retailer beloved by Catherine, Duchess of Cambridge, is shifting its focus to online shopping after a sales slump during the COVID-19 crisis.

Inditex, the parent company of the Spanish clothing brand, announced it will close as many as 1,200 stores around the world over the next three years and invest $3 billion in digital operations.

Though Inditex didn't specify which locations it will be shuttering, the plan will focus on "stores at the end of their useful life" according to the report which was published online last week.

Zara will close more than 1,000 stores by 2022. JUSTIN TALLIS / AFP/Getty Images

CEO Pablo Isla said that he expects e-commerce to make up 25% of total profits by 2022. Currently, online sales account for 14% of Zara’s total profits.

As part of the new strategy, the company will “increase the online customer service teams and the dedicated packaging both from the specific online stockrooms and from the store."

"The overriding goal between now and 2022 is to speed up full implementation of our integrated store concept, driven by the notion of being able to offer our customers uninterrupted service no matter where they find themselves, on any device and at any time of the day," Isla explained.

Zara reported a net loss of $465 million for February through April when 88% of its stores were closed due to the coronavirus, but online sales surged 95%.

Coresight Research estimates that in general, up to 20,000 to 25,000 stores will close in the U.S. before the end of the year.

“We expect that a return to pre-crisis levels in offline discretionary retail sales overall will be gradual, as we expect consumer confidence, demand and spending to be short of normal for some time,” Coresight founder and CEO Deborah Weinswig said in a report. “Given that recovery to pre-crisis levels may be gradual, retailers that were struggling to stay in business pre-crisis are unlikely to have the wherewithal to stay the course on the road to recovery and could end up closing a number of stores."

Zara is just one of several retailers faltering amid the coronavirus pandemic. J. Crew filed for Chapter 11 bankruptcy last month, as did Neiman Marcus and JCPenney. The latter also announced plans to close nearly 200 stores as part of its restructuring.