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Feasibility of ZARA in Peru Market Seeking Opportunity

INDITEX. Feasibility of ZARA in Peru Market Seeking Opportunity. Erin Bereit Tarun Hingorani Matthew Raffa Taras Sanow Jonathan Solis . Peru represents the next logical step in our strategy for the Americas . Macroeconomic Stability. Stable exchange rates and low rates of inflation.

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Feasibility of ZARA in Peru Market Seeking Opportunity

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  1. INDITEX Feasibility of ZARA in PeruMarket Seeking Opportunity Erin Bereit Tarun Hingorani Matthew Raffa Taras Sanow Jonathan Solis For Internal Discussion Purposes Only

  2. Peru represents the next logical step in our strategy for the Americas Macroeconomic Stability • Stable exchange rates and low rates of inflation. • Continuous GDP growth per capita. ZARA Existing Footprint • We have operated in South America since 1998. • Distribution centers in Argentina, Brazil, and Mexico. • Lima population over 8 million. • Target customers annual clothing and footwear expenditure $390 million in 2010 and doubling in 10 years. Local Demand for Goods • Store profitable within first 2 years of operation. • Total net benefit of $13.0 million over the first 7 years of operation. Profitable For Internal Discussion Purposes Only INDITEX

  3. Overview of Inditex / ZARA • Inditex • HQ in Arteixo, Spain • $14.7 billion in operating revenues (2009) • 4,607 stores, 8 brands, 74 countries • ZARA • Flagship brand of Inditex • First Store in 1975. • 1,680 stores in 72 countries (2009) • $9.1 billion in operating revenues (2008) • Goal of 80% of stores outside of Spain in 2020 (Current 55%). ZARA For Internal Discussion Purposes Only INDITEX

  4. Inditex has been operating its ZARA brand in South America since 1998. ZARA Source: Inditex FY 2008 Annual Report. For Internal Discussion Purposes Only INDITEX

  5. Inditex has been operating its ZARA brand in South America since 1998. ZARA Source: Inditex FY 2008 Annual Report. For Internal Discussion Purposes Only INDITEX

  6. Why invest in Peru? • Lima is 4th largest city in Latin America • Bilateral free trade agreements e.g. US, China, and EU (currently negotiating) • Political stability • Legal environment conducive to investment • Investment grade bond rating • Largest GDP growth in region in 2010 (6%) ZARA For Internal Discussion Purposes Only INDITEX

  7. Macroeconomic stability leading to… ZARA For Internal Discussion Purposes Only INDITEX

  8. Increasing FDI ZARA For Internal Discussion Purposes Only 8 INDITEX

  9. Expensive Plain ZARA will operate in a unique, sustainable position within the Peru Clothing and Footwear Marketplace • Mango • HQ in Spain • Currently 5 retail stores in Lima (6 total in Peru) • Currently pursuing a move in market position. • Topitop • HQ in Peru • Inexpensive semi-fashionable retailer • General Domestic Retailer • Provide service to mass market ZARA Mango ZARA ZARA Fashionable Topitop Generic Domestic Retailer Cheap For Internal Discussion Purposes Only INDITEX

  10. ZARA – Resources & Capabilities Competitive Advantage Effective Team of Designers Presence at High-end Retail Locations Latest Trends Spotting Team Fashion & Cost Conscious Customers Low Advertising Costs ZARA Frequent Apparel Updates 10,000 Designs Per Year Selective Outsourcing of Basic Manufacturing Appearance of Scarcity Production in Europe Quick to Market Fast Fashion Image Predominately Company-owned Distribution System For Internal Discussion Purposes Only INDITEX

  11. Proposed Operating Plan • Company owned store • Locate in Lima’s upper end shopping district (Larcomar) • Country management team • Local employees for day-to-day operations • Utilize existing regional distribution centers • Open 3Q 2011 Recommend Market Expansion ZARA Country Management Team Real Estate Contracting Permitting Strategy Local Staff Construction Stocking Implementation Zara in Peru For Internal Discussion Purposes Only INDITEX

  12. ZARA in Lima will break-even in 2 years and total net benefit of $13.0 million over the first 7 years of operation. Scenario Market Shares for Total Clothing and Footwear Spending ZARA For Internal Discussion Purposes Only INDITEX 12

  13. Questions? ¿Preguntas? Thank You ZARA Gracias For Internal Discussion Purposes Only INDITEX

  14. Sources ZARA For Internal Discussion Purposes Only INDITEX

  15. Sources ZARA For Internal Discussion Purposes Only INDITEX

  16. Market Expansion Considerations • Macroeconomic stability • Urban economic development • Relative ease of market entry • Local demand for clothing • Cost of doing business (taxes & tariffs) • Accessibility of distribution centers • Availability of prime retail space • Profitability within two years of operation ZARA For Internal Discussion Purposes Only INDITEX

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