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Online Shoppers unhappy with Zara's offerings

Zara's push towards online shopping exposes issues with the retailer’s fit, product quality and service.

The recent shift to online shopping isn’t working in the interest of retail brand Zara, as its exposes its issues with the fit, product quality and online service, according to Credit Suisse analyst Simon Irwin.

Comments about Zara products “are poor and declining” on consumer-review websites Trustpilot and Sitejabber, the analyst wrote in a note previewing owner Inditex SA’s first-half results on Sept. 12.

“We believe the ‘treasure trove’ nature of a Zara shop is still a better experience off-line,” Irwin wrote. While online is driving like-for-like sales growth, that can have a negative impact on gross margin, he also said.

The broker estimates that the Web will represent about 10 percent of Inditex’s sales this year, up from 2.4 percent in 2013. It also expects 2018 to be the sixth consecutive year of Ebit margin decline.

Inditex shares had their worst week in seven years last week, falling 8.7 percent after Morgan Stanley published a scathing report saying the retailer has gone from great to good.

Credit Suisse lowered its price target to 24 euros from 25 euros and maintained its underperform recommendation.

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