Review of the year 2012

For the Inditex Group, the year 2012 has been marked by strong growth as well as by strong investment and job creation. Sales increased by 16% over the previous year, reaching €15,946 million, while net profit rose 22% in relation to 2011 and increased to €2,360 million. The strict control of operating expenses has allowed the EBITDA to increase by 20%, to €3,913 million.

During 2012 the total number of staff in the Inditex Group reached the figure of 120,314 employees, with 10,802 jobs created in the year. The growth in employment affected all the geographical areas in which the group operates, especially in the number of permanent employees: 82% of the staff work under an indefinite contract. The global vocation of the company is reflected in the fact that its employees are of over 130 nationalities and 45 working languages. It is a young workforce (31 years old on average), in which women represent 78.7% of the total.

The ordinary investment made in 2012 exceeds €1,000 million, up to 1,094, in a year marked by an increase in its sales area and the refurbishment and improvement of stores worldwide, as well as by the new projects in the area of logistics and the modernisation of the eight distribution platforms currently in operation, all of which are located in Spain. The group has thus embarked on works to expand its headquarters in Arteixo (La Coruña), which will result in an increase of 70,000 square metres in the capacity of the Zara and Zara Home's sales areas. At the same time, it has launched a state-of-the-art logistics platform for Massimo Dutti in Tordera (Barcelona), it has embarked on the works for an automated silo for hanging garments in the Zaragoza logistics centre, and it has acquired a plot of 300,000 square metres in Guadalajara to build a new international logistics centre. In total, €450 million of investment was made in Spain.

To the ordinary investment figure we can add the amount of extraordinary investment, which amounted to €245 million, used primarily for purchasing the property which houses the Zara store on 333 Oxford Street / 89 Bond Street, in London.

Store no. 6,000

At the close of 2012, Inditex had 6,009 stores in its eight sales formats in 86 markets in five continents. In that period, 482 stores were opened in 64 different markets, five of them new: Armenia, Bosnia-Herzegovina, Ecuador, Georgia and the Former Yugoslav Republic of Macedonia.

In 2012 the new Zara global store concept was presented. This was the first part of the Group to open its chain on 666 Fifth Avenue, New York, which thus became its world flagship store. The new image is based on four principles: beauty, clarity, functionality and sustainability. Simplicity is the chief characteristic throughout the space, in the search for direct contact between the customer and fashion. In addition, the store increases the Group's environmental commitments set out in the 2011-2015 Sustainable Inditex Plan and incorporates all the elements of sustainability of the Inditex eco-efficient stores.

The renewed architectural concept applies to all new Zara store openings, including another one of the brand’s flagship stores: the one which opened at the end of the year on 460-490 Oxford Street in London, and which, in addition, is the Inditex Group's store number 6,000. A few days later another outstanding Zara store would open on no. 92, Champs Elysées, Paris. Other emblematic openings for the brand this year were the new stores in Neuhauserstrasse in Munich (Germany) or the Cape Town (South Africa) store, among others.

Results

(in million of euros)

In-store sales	Evolution of the total number of stores

Shares during 2012 - Inditex vs Indices

Massimo Dutti, on its part, began its activity in the United States, with stores in New York and Washington, as well as in Canada, with a store in Toronto. It also opened its first Taiwan store. Pull&Bear arrived in Austria, the Dominican Republic and Thailand, among others, while Zara Home opened its first stores in Brazil and Colombia, and Stradivarius did the same in, among other places, Mexico, thus increasing to 52 the number of markets in which it operates. Uterqüe chose China as its new destination for its stores, with two openings in Hong Kong and Beijing respectively. Oysho, for its part, opened its first store in Macau.

Inditex continued to strengthen its multichannel strategy in 2012. It thus opened the online Zara store in China, the online Massimo Dutti and Zara Home stores in the United States, and the online Zara Home store in Finland. With these additions, as at the end of the year the Group was operating through e-commerce in 22 countries. In addition, in March 2013 the online Zara store in Canada was launched, and Zara is expected to start operating in the Russian Federation through e-commerce during the autumn-winter season of the same year.

Committed to sustainability

Inditex's commitment to sustainable development and the protection of the environment and natural resources has always been present among the fundamental values of the company. In the framework of the 2011-2015 Inditex Sustainable Strategic Plan, the company has continued to make progress to integrate sustainability in the Group's supply chain. The first milestone of the year was the publication of the Global Water Management Strategy. This strategy is a living and dynamic document which sets out guidelines and actions to achieve a more sustainable and rational management of water. It also helps Inditex set priorities for the conservation of the environmental quality of river basins in the countries of production. In line with its long-term sustainability programme, Inditex has committed to achieve the goal of "zero discharge" of chemicals linked to manufacturing processes by 1 January 2020. To that end, Inditex is immersed in a number of collaboration projects with local authorities, other companies in the industry, suppliers, the chemical industry, NGOs and other interest groups. In its supply chain, the Group has embarked on a project to evaluate and advise a hundred suppliers on the use and management of water. In 2012 Inditex worked with over 20 suppliers in Bangladesh, China and India and made available to the public an online platform with all the information relating to the project.

Reinforced monitoring of the supply chain

During 2012, Inditex continued to make progress in its supply chain monitoring activities. It thus carried out over 3,500 audits, 48% more than in 2011. In addition, this year it carried out the task of improving those factories that had been given in the past a "D" rating in the Inditex classification system ("A" to "D"). Of the nearly 500 factories that were subjected to this process, 70% showed improvements.

With regard to the health and safety of its products, Inditex made around 35,000 visits to factories and carried out over 1.4 million analyses. All this was done with the help of a team of external supervisors which increased by 79% with respect to 2011.

Updating the codes of conduct

In addition, during the year Inditex improved its main working tools with two of its most important stakeholders: suppliers and employees.

In the first case, the Group restated the Manufacturers' and Suppliers' Code of Conduct, a document that sets out the work carried out by Inditex with regard to monitoring and improving the supply chain. The Code, which has been in force since 2001, was updated in 2012, strengthening, among other things, Inditex's specific environmental standards that must be complied with by suppliers, as well as in relation to minimising products' environmental footprint or impact.

Inditex has also updated the code of conduct that must be complied with by its over 120,000 employees. This instrument, the Code of Conduct and Responsible Practices, lays down the criteria that must govern the actions of the Group’s employees and establishes the values and principles that must govern relations between its employees and the company's stakeholders.

Rewards for shareholders

In 2013, the Inditex Group will continue with its shareholder reward policy based on a sound financial position. At the General Meeting of Shareholders scheduled for July, the Board of Directors of Inditex will propose a dividend of €2.20 per share, 22% more than the amount paid in 2012.

Share performance

Shares in Inditex saw growth of 54.7% during the financial year 2012, closing at 103.2 Euros per share on 31st January 2013, compared to the 14.6% increase in the Dow Jones Stoxx 600 Retail Index or the -1.7% decline in the Spanish Ibex 35 reference index over the same period. The average negotiated volume of shares was approximately 2.6 million per day.

Inditex´s market capitalisation stood at 64,328 million Euros at year end, 602% more than its initial market value on 23rd May 2001, as compared to the -13% decline of the IBEX 35 during the same period.

In May and November 2012, the dividend for fiscal 2011 was paid out, amounting to the sum of 1.80 Euros per share.

The Inditex Group’s strong commitment to investment during 2012, both in the area of logistics and with regard to the expansion and renewal of its sales areas, ensures its future growth. A prominent place in next year’s Annual Report will doubtless be occupied by the entry of Zara into two new online markets, Canada and the Russian Federation, as well as by the inauguration of most of the improvements to logistics facilities currently in progress.