The succession, Inditex's best kept open secret
For one thing, it was what everyone expected to happen. On the other, she has caught everyone by surprise. The succession to the presidency of Inditex has been the company's best kept open secret. For years, everything pointed to the fact that the youngest of the three offspring of Amancio Ortega —Sandra, Marcos and Marta— was the one chosen to inherit the high command of the Galician textile empire, a company valued at around 87,000 million euros, the largest in the world. Ibex 35. A succession that will materialize on April 1, 2022 and that was announced last Tuesday by surprise, ahead of schedule. The movement was delicate and any leak was feared. Hence, the maneuver was carried out with seamless secrecy and discretion, the hallmark of the Ortegas. The operation began a few months ago and has been kept as a state secret ever since. The move leaves some unknowns unconvincingly explained.
Marta Ortega, 37, will chair a board of directors that will include her father, Amancio Ortega, and her mother, Flora Pérez. Her uncles Óscar Pérez and Jorge Pérez, Flora's brothers with extensive and successful careers in the company, will form part of the newly created management committee, along with other executives with proven track records in the group. The new CEO and chief executive, Óscar García Maceiras, is a lawyer whom everyone describes as brilliant, but without proven management experience.
Investors have not liked the cocktail party, who are suspicious of the departure of Pablo Isla, a professional who has successfully managed the company for 17 years, and view the stage that is opening with some uncertainty. The company lost 5,600 million in value on the stock market on Tuesday and has not recovered it for now. “The reaction has been very normal. Isla's management has been extraordinary over this time and investors had great professional esteem for it," explains Iván San Félix, an analyst at Renta 4.
In Inditex they avoid explaining how the process that led to the succession was forged. Isla, 57, is very careful with her words and in the brief telematic press conference she gave after the announcement of the replacement, she did not provide any more detail than she wanted: "This is something we have been working on for a long time in a very discreet. There is not a day that you say: 'This is the day that it has been set'. It is the result of reflection. We say in the statement that we are doing this at my initiative as president and Amancio Ortega as founder of the company and it is something that we have been maturing and forging in recent times in a very discreet way.
“A long time ago”: that is the official explanation. Sources close to the company suggest that the decision began to take shape three or four months ago. Those who pressed the red button for the machinery to start were Amancio Ortega, founder and largest shareholder of the group, and Isla himself, who will continue as executive president until the end of March. Between the two, who maintain a close relationship forged for years on a day-to-day basis in Arteixo (A Coruña), the company's headquarters, preparations began without making a noise and without anyone inside or outside the company imagining anything.
Very few people knew. At first, in addition to Isla and Ortega, only the founder's wife, Flora Pérez, also an Inditex director, and Marta Ortega herself. Among the first to know about the movements was also José Arnau, a trusted family man, vice president of Inditex and chief executive of Grupo Pontegadea. When the decision was already taking shape, Óscar García Maceiras and Carlos Crespo, the outgoing CEO, knew about it. The other councilors knew it at least since last week and kept the secret with almost no fissure.
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On Monday the internal alarms went off when a local media outlet, Economía Digital Galicia, published on the internet: “Inditex prepares the replacement of its CEO, Carlos Crespo”. The news reported that Inditex had called a meeting of directors of chains and countries for Tuesday and attributed Crespo's replacement to the fact that he had not earned the trust of those closest to Amancio Ortega. Nothing was said, on the other hand, about who would be his replacement and, above all, there was not a word about the change in the presidency. But, as Carlos Crespo actually maintained his powers and to avoid possible speculation, it was decided to advance the publication.
The council met that same afternoon. Formally, the Appointments Committee, chaired by Emilio Saracho, a banker with a long history at J. P. Morgan and former president of Banco Popular, was the one who put forward the proposals. In practice, everything arrived already cooked in advance. The change in the presidency and the other agreements were approved unanimously. There was only one more night to keep the secret. At 7:36 a.m. on Tuesday, November 30, Inditex registered a communication with the announcements with the National Securities Market Commission. Two minutes later, the company's communication department sent its press release to all the media.
The surprise was general. Although for a long time it was taken for granted that Marta Ortega was called to be the president of Inditex. This was pointed out, for example, by José María Castellano, who was the company's CEO until 2005: “It was already clear when I was the CEO that Ortega's natural successor was going to be his daughter Marta. She is a prepared, balanced, smart girl and both Amancio Ortega and his wife, Flora Pérez, have done a great job. They have prepared it and it was clear that there was going to be that succession, ”he declared on Tuesday in La Sexta.
That family origin made her the target of minority criticism from some of the most left-wing political parties. “She is not an heiress to Inditex because she worked as a saleswoman, she is because she is her daughter. Don't sell it as a meritocracy," Podemos tweeted. "Meritocracy is the parents, literally." The case of Marta Ortega is by no means unique. When she takes office, she will be the eighth president of an Ibex company to inherit the position from her family, although each case is different. Ortega, unlike most of the other examples, will not assume the executive presidency, but on a dominical basis, that is, on behalf of the owners. His father, founder of the company, still holds almost 60% of the capital.
More glamour
The steps of the future president in the company have been studied to the millimeter from the beginning. Her journey, designed by experts, has made it easier for her to learn all aspects of machinery as sophisticated as Inditex. He took his first steps at street level, in a store face to face with customers. It was at Zara on King's Road, in the London neighborhood of Chelsea. Later, she went through several departments to learn all the processes of the firm until she reached the supervision of women's fashion design and the development of the brand image.
In this task, he has contributed to bringing glamor to Zara. He has promoted campaigns with prestigious creatives in the sector such as Steven Meisel, Fabien Baron, Karl Templer or Luca Guadagnino, as well as the launch of new premium collections such as Zara SRPLS and Charlotte Gainsbourg by Zara. The opening party of the Peter Lindbergh photographic exhibition in A Coruña this week is a good reflection of this. A hundred designers, artists, stylists, photographers, actors, models and influencers gathered to pay tribute to the photographer who died in September 2019, with Marta Ortega as host. Gone are the times when Zara was seen by that world with a certain amount of contempt.
Thus, Ortega's role will be more than non-executive chair of the board of directors. "Marta will continue to be very involved with the product, she will continue supervising Zara's image and Zara's fashion product proposal, and in addition to that, she will carry out her duties as president," the still president explained on Tuesday. .
When Isla arrived at Inditex, probably her weakest point was fashion, but she had Amancio Ortega as president. The opposite is true for Marta Ortega: she is in love with fashion, but she will leave management in the hands of the CEO and the management committee. In the interview published at the end of August in The Wall Street Journal, which took place before the presidential operation was underway, but which in some way was premonitory, Ortega said that she would always be where the company needed her most, although she made clear her preferences: “You never know what your future will be, and I am open to it. But to be honest, I'd like to stay close to the product. I think that's what my father always did."
For the Galician fashion empire, his appointment marks the culmination of a process of generational change that began in 2011, when Amancio Ortega left the presidency. A position that will now return to the family a decade later. The expected.
The times of the relay are the ones that have surprised and have left less convincing explanations. The official statement gave no explanation and the question was posed to the outgoing president: “Why are we now addressing this transition? Because we understand that it is an optimal time to address it. Because the company is very solid, it has a well-defined strategy, it has fantastic teams in all areas, that combination of youth and experience," Isla told reporters on Tuesday. The company insists that it was an appropriate time, after having successfully overcome the coronavirus crisis. Inditex has multiplied its sales and its value on the Stock Market in Isla's tenure, even with a pandemic in the middle, it has a record cash position and is succeeding in digital transformation.
Although it is true that the company is in top shape, that it has recovered sales prior to the health crisis and that it has overcome supply bottlenecks much better than its competitors, it is also true that it faces a full future of challenges. On the one hand, the questioning from different areas of fast fashion, which affects the entire sector despite the efforts in terms of sustainability that Inditex has made. On the other, the digital competition of new entrants such as the German Zalando, the British Asos and Boohoo, the American Fashion Nova or the brilliant Chinese firm Shein, some of which try to emulate Zara in flexibility and responsiveness. Furthermore, the pandemic has not ended and continues to affect activity.
Ortega's age
So why not wait for something else? The age of Amancio Ortega, who will turn 86 the week his daughter becomes president, seems to be a decisive factor, although the company shuns any comment on it as if it were a taboo. It is not for José María Castellano, the former CEO who left the company in 2005: "I imagine that the age of Amancio Ortega and the time that it will take for any person to take over the company have now led to that decision . He is 85 years old and I think he always makes decisions with enough time to adapt to the new situation," he said on Tuesday. The founder will thus be able to support his daughter and facilitate the transition.
Isla would have been willing to stay on longer if Ortega had asked him to, but those who know him say he never intended to stay in office forever. It was clear that he was going to make the transition easy, knowing that Ortega is the owner of the company, and he has told his friends that he is very happy to have taken the step. "Making this transition a reality is the culmination of my commitment to Inditex and to Amancio Ortega," he said on Tuesday. The sources consulted, both close to Isla and the Ortega family, rule out that the trigger for the replacement is a deterioration of the magnificent relationship that has existed between the two over the years. The most they concede is that this relationship, like all of them, has had its ups and downs.
The other matter not fully explained has been the change of CEO. Carlos Crespo continues to appear as such on the Inditex website, although as of Tuesday he is no longer. The one for Crespo was an appointment by Pablo Isla a little over two years ago, but when it came to naming a new chief executive, it was not the one chosen, but Óscar García Maceiras, 46. Although Maceiras had only been in the group for eight months, the vice president of Inditex and a person very close to the Ortega family, José Arnau, knew him well from when they both coincided for years at Banco Pastor: Arnau as a director representing Amancio's stake Ortega, and Maceiras as general secretary and secretary of the council.
Perhaps aware that for Crespo, a man of the house, highly appreciated internally, returning to the position he held two and a half years ago may have been somewhat painful, Isla dedicated the most affectionate words of her press conference to him: “ He is a professional of an extraordinary level, he leads key areas for the company that distinguish us, that make us unique in areas such as sustainability, digital transformation, transportation, supply chain... He is an absolutely key player in the present and in the future. future of the company”, he stressed.
The transition is underway. Marta Ortega preferred not to appear before the press, but the new CEO is already practicing. García Maceiras hardly intervened in the press conference in which his appointment was explained, but he sent a message of continuity in the strategy, in this business model with the integration of design, manufacturing, logistics, reaction capacity and also adapting to the new circumstances. Isla usually highlights the entrepreneurial spirit, teamwork, humility and ambition as great values of Inditex, which he summarizes: "Our company breathes Amancio Ortega everywhere". Now he will do it with his daughter in front.
The transition begins with the big investors
The transition at Inditex has already begun. Although the replacement in the presidency will not take place until April 1, the new CEO, Óscar García Maceiras, who will become chief executive with the departure of Pablo Isla, took office on the same Monday, as soon as he was appointed. Isla will be dedicated these four months to transferring the papers internally and externally to the new top managers of the company.
Given the market's negative reaction to the announcements, one of the first tasks has been to explain the movements to the large institutional investors present in the capital of Inditex, mainly investment and pension fund managers. According to market sources, Isla and García Maceiras have already held telematic meetings with large investors in a kind of virtual road show. The company has declined to specify how many meetings have been held and with which firms, but sources present at some of the meetings indicate that a message of stability and continuity in the company's strategy has been transmitted.
Isla's future: manager or director?
Pablo Isla has declined to comment on his future when he leaves Inditex. He leaves the company with a fortune in shares, a pension fund, severance pay and a non-compete agreement that allow him to be very calm about it. “These four months I will be fully focused on making the transition a reality, on completing this transition, which for me is something absolutely decisive, extremely important for the company, for all the people who are part of it, for Marta, for Óscar... And then, we'll see”, he said on Tuesday. Offers will not be lacking. Isla has been an independent director of the Swiss multinational Nestlé for two and a half years, where he received a remuneration of around 650,000 euros in 2020. With a resume like his, he will surely receive proposals from top-level companies and firms to join as an independent director or as a consultant. It is more difficult to forge an opportunity to lead a large company again as chief executive. After having been in charge of Inditex, there are not many companies that can offer him such an attractive project and several stars would have to be conjured up to make everything add up, but it cannot be ruled out either. "We'll see".
