This profile is taken from the upcoming Top 100 Executives 2020 Leaders League special report.
Seen by some as Spain’s leading CEO, Pablo Isla’s list of achievements is impressive to say the least. Under his leadership, Inditex (which owns the clothes retailer Zara) has become the biggest listed Spanish company with a market capitalization of €81.6 billion in 2019. Isla has tripled the size of the company during his time at the helm and multiplied its value by seven. Inditex has more than 7,400 stores and sells online in more than 200 markets. It has a workforce of more than 170,000 people. Since 2005, Inditex has opened on average one store a day.
Isla’s success in adapting the business’ strategy in order to compete in the online marketplace is viewed as one of the key reasons for the company’s growth. Another of Isla’s strengths is his strategy of placing an emphasis on ensuring employees are highly motivated. He has said the “most important thing in a company is the people.”
Colleagues say Isla’s style of management is humble, bordering on shy at times. He spends a lot of his time traveling to visit stores – at the company’s head office he is understood to manage by walking around rather than holding formal meetings. This philosophy is based on his wish to ensure the company retains an entrepreneurial, ‘startup’ culture despite the firm’s massive size.
“Isla has adopted a highly effective strategy of harnessing technological innovation to improve Inditex’s customer service”
The company has grown dramatically in recent years, and its expansion shows no signs of abating. In FY19, Inditex's net sales increased by eight per cent to €28.3 billion. Like-for-like sales growth was 6.5 per cent. Inditex reported growth in sales from its online platform of 23 per cent to €3.9 billion, which is 14% per cent of the total. Net profit registered growth of six per cent to €3.6 billion – it would have increased by 12 per cent, but the business decided to recognize an inventory provision of €287 million in response to the coronavirus pandemic.
Isla has not been afraid to sanction substantial investment to fully integrate Inditex’s stores with its online operation – in the 2019 financial year, the company invested €1.2 billion in this project. Inditex operates in 96 markets, with stores and online fully integrated in 66 of these.
Isla has also adopted a highly effective strategy of harnessing technological innovation to improve Inditex’s customer service. A key aspect of this has matching supply to real customer demand by deploying RFID technology throughout its integrated offline-online store platform. The RFID system codes each garment in the logistics centers, which means that when shipments reach the stores twice weekly, the system immediately pinpoints which sizes need replenishing.
This strategy has enabled Inditex to limit the damage inflicted by the coronavirus pandemic. Inditex’s 2020 Q1 sales slump was limited to 44 per cent, despite the fact that up to 88 per cent of its stores were closed. Meanwhile, Isla’s shrewd investment in Inditex’s online operation has paid off handsomely – while overall sales dropped in the first quarter of this year, online sales were up 50 per cent. In April this year, online sales jumped 95 per cent. By 2022, Inditex’s online sales are expected to account for more than 25 per cent of the total, compared to 14 per cent in FY19. In announcing the Q1 results, Isla once again demonstrated the skills that make him a much-admired leader when he said: “Our priority through the crisis has been and continues to be the health and safety of our people and our customers. I would like to thank all of our people for their tremendous commitment.”