letter from the Chairman

Dear Friends,

Once again, 2013 was a year marked by the growth of our business, the international expansion of our retail formats, investment and job creation. Last year we continued to promote our strategy to open and refurbish emblematic stores and implemented new projects both on the retail and the operational front.

With a constant focus on transparency in management, this Annual Report endeavours to go beyond the mere listing of facts and figures. Our aim is to ensure that the Annual Report sets out the key details that will allow all stakeholders to make an in-depth analysis of our performance. In this respect, our commitment to the United Nations’ Global Compact, participation in international platforms such as the Ethical Trading Initiative or the Sustainable Apparel Coalition, and collaboration with the international trade union federation IndustriALL are good examples of the rigorous way in which we achieve this transparency.

This effort is linked to Inditex’s strong commitment to preparing a comprehensive Report, in which all variables of our business are presented in a clear, interconnected way. Only this kind of overview of the business and the management of its impact on the environment can serve to adequately assess the progress made in our sustainability strategy. The company’s culture and philosophy have always been linked to creating value beyond strict financial profitability; value for its customers, employees, shareholders, business partners and the community.

This commitment is reflected in the economic boost generated by the Group’s activity, not only in the form of job creation, with more than 8,000 posts created in 2013, but also in the impetus given to the activities of all of the suppliers linked to our business activity, which in turn channel wealth into communities. Inditex also makes an important tax contribution, both in terms of the taxes paid by the company worldwide, with more than 4 billion in direct taxes or taxes collected for governments during 2013, and ­­– fundamentally – in Spain, where the Group’s tax contributions reached over 1.2 billion euros in total.

In many cases this value is expressed in elements that are not strictly economic, related to issues such as our shareholders’ confidence in the quality of Inditex’s corporate governance and our customers’ confidence in the products they buy in our stores or our continuous improvement of working conditions in the supply chain and our ability to collaborate with charitable organisations to develop community programmes.

A wealth of information on these and other aspects can be found in the following pages along with, naturally, the data that reflects the group’s healthy economic performance in a year of significant international expansion and investment as well as an increase in return to our shareholders. Inditex’s consolidated sales in 2013 totalled over 16.7 billion euros, backing its growth in the excellent performance of like-for-like sales, which rose by 3%. This figure is particularly relevant if we consider that it is preceded by a 6% growth in 2012 and a cumulative 17% growth over the last four fiscal years.

Another important factor in the increase in sales has been the 9% increase in retail space, which added over 280,000 square metres of new floor space for a total of almost 3.5 million metres. In terms of this growth is it worth noting that the new retail space is largely concentrated in key locations, both in the case of new stores and the expansion of existing ones. The range of refurbishments that have been carried out to implement the new look of our retail formats with extended retail space has had a very significant impact in 2013, with more than a hundred refurbishments carried out in the company’s most emblematic commercial locations around the world.

In this regard, I would also like to emphasise the progress made in implementing our eco-efficient store model, now fully operational in more than 2,200 stores and which will spread to our entire sales network by no later than 2020. Implementation of this model has continued to be backed up by international certification awarded to some of our most prominent stores. Thus, the U.S. Green Building Council has awarded the highest LEED certifications to our new Zara stores on the Champs Élysées, on Kalverstraat in Amsterdam, in the Haas-Haus in Vienna and Park House in London, and on Nanjing West Street in Shanghai.

If the physical expansion of our retail space has been significant, so has the development of our online sales platform, which closed out 2013 with a presence in 25 markets and plans to launch online sales in South Korea and Mexico this year. As we have maintained since we started our online sales with Zara Home in 2007, our goal is to gradually reach online all the markets in which we have bricks-and-mortar stores. The pace at which we are expanding our online business is more than satisfactory for the moment, and we are currently operating in most of the markets in which e-commerce has made significant inroads.

One of the pillars that underpins our global expansion is the high efficiency of our logistics system, which is subject to ongoing dimensioning efforts required by the increasing numbers of stores and markets in which we operate. Thus, significant investments in all operating distribution centres were made in 2013 and construction began on a new centre in Cabanillas (Guadalajara, Spain), which will open its doors in 2014. In terms of investments I should also mention the expansion of our headquarters in Arteixo (A Coruña, Spain), which almost doubled its working area with the addition of 70,000 square metres of new floor space.

Regarding the outlook for 2014, the company will keep its expansion pace with a total planned investment of 1.35 billion euros. All our retail formats will continue to take advantage of the excellent opportunities both in bricks-and-mortar and online stores on a global scale.

Inditex has indeed an enormous potential for the future, based on its competitive dynamism and in particular, on the extreme professionalism and commitment of all the people who are part of this company. Without the engagement and effort of those human teams, none of the figures below-stated would make any sense. Therefore, I would like to thank each and every one of the people who are part of Inditex for their invaluable contribution to the company’s results.

This high level of commitment from the almost 130,000 people that form Inditex Group allows us not only to successfully face the competitive demands of the global market but also, as I commented at the start of this letter, our ongoing effort to create value that goes beyond strict profitability.

Pablo Isla