"In Inditex there is little fat, everything is muscle," say sources close to the textile giant. They do it to explain the uniqueness of the departure of several directors of the owner of Zara since the outbreak of the pandemic.

In the last days of July 2020, the group added dozens of outlets in various brands, such as Berhska, Oysho and, more specifically, Massimo Dutti, as reported by the specialized portal Moda.es. The company said goodbye to executives such as Ramón Rubio, financial manager of Massimo Dutti, but also to media signings such as the aristocrat Rafael Medina, after facing the most turbulent time in its history, which forced it to close all its stores, generated its first losses since the IPO and was a definitive boost to the online channel.

Before the arrival of the coronavirus, the Galician group was already designing a transformation plan linked, fundamentally, to digitization. This remodeling continues and fully affects the entire structure of Inditex and, especially, the divisions focused on men's fashion, strongly impacted by the pandemic.

In addition to Rubio and Medina, Mónica Coca, Purchasing Director at Oysho, has left the company after 14 years with the company; Jordi Blasi, head of Zara Caballero; José Luis Goñi, linked to the group for 15 years and for the last 2 years in charge of the group's logistics hub in the Netherlands; or María Fanjul, director of the Inditex online channel.

Other historical names, such as Antonio Abril, general secretary of the multinational and Ramón Reñón, deputy general director to the president, also said goodbye, in both cases due to retirement.

From Inditex they explain that, at this specific moment, there are more rises than falls both at a general level and the brands that sell men's fashion. In addition, they point out that these are natural movements within the squad and that they follow the usual dynamics of other years.

Zara Caballero departures: "There are pools every week of the next to leave; it is a very tense situation"

In addition to the departures that have been made public, internal sources affirm that around 80% of the directors of Zara Caballero have left the company.

Specifically, they point to the departure of Juan Mendivil, director of Sport; Ibón Murga, Director of Accessories; Alberto Garanto, Head of Design; and Eduardo Sabater, director of Circular. This last position, they specify, would be in charge of buying casual fashion products for about 900 million euros a year and who coordinates a team of about 30 people who design, buy and propose to send to the store.

The people who had management control (Christian Montejo) or distribution would also have left. Two other managers would have changed their functions. Similar movements would have occurred in Zara Home and Massimo Dutti.

"Anyone who disconnects from the culture and speed of the business, comes out spinning," the sources say. "During this time, every Thursday or Friday there are departures. There are pools every week. It is a very tense situation," company workers confess.

They recall that Zara Home already went through a similar process after the departure of its director, Eva Cárdenas, and they point to the vital support that Zara represents for the decoration and home products banner. Subsequently, the restructuring continued in other brands. Now, it is the men's fashion divisions that face this process.

Men's fashion has, however, a reduced weight. In Zara there would be about 10 directors in Caballero for a team of about 300 people. Before the pandemic, its turnover was around 4,000 million euros, which would mean around 20% of the income generated by Zara in 2019.

These same sources detail that Zara's Women's and Children's division responded very well to the impact of COVID-19. The same did not happen with Caballero.

The complex scenario facing Massimo Dutti

Massimo Dutti was born in Barcelona in 1985. He did so outside the umbrella of Inditex, which did not acquire it until 1991. Once the brand was integrated into the company, it launched its women's line, although its target audience continued to be men . In his case, this approach, which for decades was his great competitive advantage, is today his Achilles heel. The sources consulted agree that it is "in full rethinking of its offer and its DNA."

Last summer, its CFO, Ramón Rubio, left Massimo Dutti after more than 20 years with the company. "He was part of the landscape. He really was the one who ran the company, all the decisions went through him," they explain.

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Also a year ago he left the company Rafael Medina. The Duke of Feria had joined Inditex —which generally maintains a low profile— in 2014 to lead the direction of men's personal tailoring (a service that allows certain garments to be made to measure). "It was a signing to make a mark and the reality is that his work was more discreet than expected," they detail. "It had been disconnected for some time and the transformation plan was taken advantage of to do without it."

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"A progressive casualization of men's fashion has made the more formal clothes in the store, with a higher average price, lose steam," they say. Other sources agree: "It was difficult to grow. Every year the entry into balance -number of garments that reach balance- worsened and that affected the margin, being in addition to the brands that grew the least, the least profitable".

Teleworking as a new labor paradigm has not helped to alleviate this situation. A study by the consultant Kantar collected by Moda.es reveals that, during the first quarter of the year, sales of men's clothing in Spain contracted by 12.6% compared to the same period in 2020. Another bad omen is provided by ICEX, which points out that men's clothing was among the divisions hardest hit if purchases abroad are analysed, with a fall of 14.8%.

According to the company's figures, Massimo Dutti is the banner where the impact of the health crisis has been greatest. In 2020, it cut its revenue by 37%, to 1,197 million euros, the largest percentage drop in the entire group. You have to go back to 2012 to find a similar turnover (1,134 million). As of April 30, 2021, it had 668 stores, 82 points of sale less than a year ago.

Since 2015, the chain had been growing, but unevenly and at a slower pace than others such as Pull & Bear. If until 2017 its sales increased year after year by over 8%, in 2018 they did so by only 2%. In the year prior to the pandemic, it managed to rise to 5.43%. In 2020, the big fall came.

Among the 8 brands of the group, Zara continues to be the flagship and its great lifeline: last fiscal year, it contributed 69.3% of the group's revenue, compared to 69.1% in 2019. Its contribution is almost 8 times higher than that of the next brand by sales volume, Berhska, with 8.69%.

Inditex's workforce is reduced by 18% in one year

At the end of fiscal year 2020 —which ended on January 31 of this year—, Inditex was made up of 144,116 people. Spain accounted for 28%, with 40,279 employees. Despite the strong impact of the pandemic on the business, the company did not file a Temporary Employment Regulation File (ERTE). From the company they explain that the guidelines are clear: preserve employment, guaranteed wages and the stability of the workforce.

However, at the end of the year, the total workforce had been reduced by 32,495 people compared to 2019, which is 18.4% less. An adjustment that is explained by the stores, which one year reduced their workers by 30,816. By type of contract, in 2020, 87% of the team had an indefinite employment relationship with the company, although the number decreased by 9,749 people. The bulk of the permanent positions continue to fall on the domestic market —where Inditex has its headquarters—, with 36,627.

Regarding the professional classification, the group's non-financial information statement does show an increase of 2,118 people in management positions —employees with responsibility for interdisciplinary work groups, as well as store managers—, reaching 12,591 in fiscal year 2020.

According to union sources, in the case of departures, another point to take into account is the lack of a representative body for workers at Inditex. In the "foundation", the name that central services have historically received, there is no works council, the employees indicate. Yes there is in stores and warehouse.

The salary of the team considered as management by the group stood in 2020 at just over 50,000 euros on average per person. Regarding compensation for this type of professional, they are not public nor are any items in this regard reflected in the company's annual accounts, as would happen in the case of compensation to senior management - there is none corresponding to the 2020 financial year.

In senior management —a scale that not only includes the general managers of the chains—, the average remuneration was 1.3 million euros in 2020, which represents a drop of approximately 8% compared to 2019 and of up to 32% in relation to 2018. As can be seen from the previous report, the 21 executives that are part of this group —excluding the executive directors: Pablo Isla, executive president of Inditex, and Carlos Crespo, CEO— distributed 27 79 million euros in fiscal year 2020, 8% below 2019 and 32% less than in 2018.

In many companies, it is common for the link between senior managers and the company to be of a commercial nature —a contract for the provision of services— and not of a labor nature —subject to the workers' statute—.

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How does Inditex work from within?

Regarding the commercial structure of Inditex, close sources explain that it would be made up of the director of the chain and the financial director and, furthermore, in the case of Zara there would be a director for each of the sections - the Women's section falls to Beatriz Padín - and a director of management control, Miguel Díaz. "She is, today, the most powerful person in terms of the company's business," they add.

However, internal sources explain that, in general, the concept of director is somewhat confusing in commercial departments and visibility into the hierarchical structure is limited. "We have never seen an organization chart. It is something that only Human Resources have access to," they point out. This department is directed by Begoña López-Cano.

To the question of how Inditex reorders its team after a departure, the company's response is that these positions are filled both by attracting external talent and, above all, by internal promotion. And they explain that there is a firm commitment to transversal initiatives that promote the development of internal talent.

In Arteixo —where Inditex has its headquarters—, the workers give as an example, internal promotion works in the commercial departments, generally linked to Óscar Pérez, director of Zara, or Padín. "They fill these positions with trusted people who come from other departments and who are unrelated to management, which sometimes creates a difficult climate," they add. Other brands tend to look abroad.

Closure of stores and extraordinary provision

In June 2020, Inditex made an important operational decision: to absorb 1,200 stores, of which between 250 and 300 were in Spain. The plan focused on stores at the end of their useful life, especially young formats, and whose sales could be recovered with nearby points and online. Under this premise, the company operated, as of April 30, 6,758 points, 654 less than a year ago. With regard to the impact on the workforce —relocations were offered to maintain employment—, from Inditex they recall that all the measures implemented have been agreed upon by unions both at the national level and with the European Union Committee.

Months before, coinciding with the presentation of the 2019 annual results and as a preventive measure against COVID-19 —which was already showing the first signs of global impact—, it had provisioned 287 million euros to adjust the net realizable value inventory estimate for the spring/summer campaign as of January 31, 2020.

This, in other words, is making an adjustment to the estimated sale price of an asset in the normal course of the operation less the estimated costs to complete its production and those necessary to carry out the sale.

"Four years ago there was a strategy analysis, outlining the closure of stores and the commitment to online. The only thing the coronavirus did was accelerate it," explain knowledgeable sources. In fact, in 2020, Internet sales became the group's great asset, contributing 6,612 million. This boom, together with the progressive opening of points of sale, made Inditex earn 421 million euros in the first quarter of its 2021 fiscal year —from February to April.

In parallel, other sources close to the group add that Inditex has known how to listen to the noise of the market and has taken advantage of the current situation to review structures and processes.

"One of the key elements of Inditex's culture, and one that has manifested itself over the years, is knowing how to identify the moment in which the company is and where it is headed and with that make decisions regardless of whether the people affected are historical or not," they conclude.