MADRID (Reuters) – Inditex <ITX.MC> has switched its clothes factories in Spain over to making medical supplies and its logistics hub has almost ground to a halt, effectively freezing the nerve centre of its business from which it supplies stores worldwide.
Retailers around the world have had to close shops and in some cases their entire business as governments have told people to stay at home to try to contain the coronavirus pandemic.
Inditex, the owner of brands including Zara, Massimo Dutti and Bershka, said in its annual results on March 18 that it had temporarily closed 3,785 stores worldwide.
That would leave around half of its shops still open, suggesting its global footprint might help it to cope better in the crisis than some rivals.
However, with Spain suffering the most deadly outbreak of the coronavirus outside Italy, the government on Saturday tightened the terms of its lockdown – already entering its third week – by ordering all non-essential workers to stay at home for two weeks from March 30 to April 9.
That has meant Inditex’s 13 factories in its home market have had to stop making clothes and – in order to remain open as well as to help with the fight against the coronavirus – they have switched to producing medical supplies like scrubs and masks, according to four union representatives.
Inditex does not disclose the proportion of its fashions made in Spain, but says it sources 57% from factories near its Spanish headquarters – mostly in Spain, Portugal, Turkey and Morocco – so it can quickly refresh its stores around the world.
The tightened restrictions since Saturday also mean the company’s 10 logistics centres in Spain – the heart of its global distribution operations – have almost ground to a halt, two union officials and a worker said, putting a question mark over supplies to shops elsewhere in the world that remain open.
In Inditex’s highly-centralised system, the logistics centres in Spain make two deliveries per week to stores to ensure they are kept up to date with the latest fashions.
“Store orders are not being taken care of during this time,” said one union representative, who spoke on condition of anonymity. “All work for stores has stopped.”
Inditex did not respond to a request for comment.
Inditex’s rival, H&M <HMb.ST> of Sweden, on Friday said it expected a loss in the second quarter after reporting a 46% plunge in March sales as the pandemic took its toll.
Inditex’s logistics centres are allowed to stay open to process online orders, as e-commerce is one of the sectors of the economy classed as essential by the Spanish government, the union representative said.
However, he said the centres were now operating for as little as one reduced shift of four hours per week.
The priority for workers is to unload trucks that arrive from suppliers in countries like Turkey and Morocco, he said, so as not to leave them unattended at loading bays. The number of trucks arriving at the centres is greatly reduced, he added.
A notice posted on Tuesday on one union’s Facebook page for Inditex’s logistics and distribution platform in Zaragoza, northeast Spain, asked for workers to sign up for two four-hour shifts per week to cover minimum service.
The platform is working at around 15% its usual levels of activity, said one worker, speaking on condition on anonymity. Logistics centres are full of merchandise because so many shops are closed, he said.
The worker said clothing was being sent to China to serve online orders on cargo planes from Zaragoza that come back loaded with medical supplies for Spain.
Inditex’s billionaire founder and owner, Amancio Ortega, said this week his foundation had bought medical material worth 63 million euros ($68 million) – including ventilators, masks and testing kits – for Spain’s fight against the coronavirus.
Government officials have highlighted the importance of the company’s capabilities in bringing in medical supplies.
“Without Inditex’s planes, most of the supplies would be stuck in China,” said Alberto Nunez Feijoo, head of the northern region of Galicia, where Inditex has its headquarters.
(Reporting By Sonya Dowsett; Editing by Mark Potter)