1.Activity and description of the Group

Industria de Diseño Textil, S.A. (“Inditex”), domiciled in Spain (Avenida de la Diputación s/n Edificio Inditex, Arteixo, A Coruña), is the Parent of a group of companies, the principal activity of which consists of the distribution of fashion items, mainly clothing, footwear, accessories and household textile products. Inditex carries out its activity through various commercial formats such as Zara, Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterqüe. Inditex is listed on all four Spanish stock exchanges and, together with its subsidiary companies, comprises the Inditex Group (“the Group”).

Each format’s commercial activity is carried out through chains of stores managed directly by companies in which Inditex holds all or the majority of the share capital, with the exception of certain countries where, for various reasons, the retail selling activity is performed through franchises. Certain franchise agreements entered into by the Group include purchase options which, if exercised, would entitle the Group to lease the premises in which the franchised stores operate and the assets associated with these stores. These options may be exercised after a certain period of time has elapsed since the signing of the franchise agreement.

Inditex’s business model is characterized by the search for flexibility in adapting production to market demand by controlling the supply chain throughout the various stages of design, manufacture and retailing. This enables it to focus both its own and suppliers’ production on changes in market trends during each sales campaign.

The Group’s logistics system is based on constant deliveries from the distribution centers of the various commercial formats to stores throughout each season. This system essentially operates through centralized logistics centers for each concept in which inventory is stored and distributed to stores worldwide.

At 31 January 2013 the various Group formats had stores in 86 countries, as follows:

Number of stores

	Company managed	Franchises	Total
Spain	1,894	36	1,930
Rest of Europe	2,407	137	2,544
Americas	380	102	482
Rest of the world	565	488	1,053
Total	5,246	763	6,009

At 31 January 2012, the geographical distribution of stores was as follows:

Number of stores

	Company managed	Franchises	Total
Spain	1,898	34	1,932
Rest of Europe	2,199	115	2,314
Americas	349	76	425
Rest of the world	408	448	856
Total	4,854	673	5,527

The majority of stores premises are held under operating leases. Information on the main terms of lease contracts is provided in note 23.