Turns out fast-fashion success story Zara is cashing in on Australian consumers, just like all the other multinationals. But at least Zara is paying its fair share of tax while it goes about it.
And it would be unfair to blame the Spanish clothing empire for making more profit out of Australians than it does elsewhere in the world - if the local competition is so slack that Zara can charge more here than it does elsewhere, so be it.
Besides, local consumers obviously don't mind. While plenty of established rag traders suffer, the customers keep throwing money at Zara's tills. And it's still early days in the international retailers' invasion of these shores.
Zara's annual accounts filed with ASIC showed the retailer's
start-up in Australia has been extraordinarily successful. It opened its first store here in April 2011, and by the end of January 2012 it had three stores that had generated sales of $68.5 million for the year and net profit of $9.4 million.
The figures now in for the year to January 2013 show six stores, $106.8 million in sales and $18 million profit - but that's not the half of it.
An examination of the numbers by Deutsche Bank's retail analysts shows Zara is doing proportionally better out of Australia than from the rest of its global operations, despite all the costs of being in start-up mode - and never mind the usual retailers' complaints about high Australian wages and rent.
Zara enjoys a gross profit margin of 66.7 per cent in Australia, compared with group gross margin of about 60 per cent. Deutsche says that's consistent with industry feedback of higher local prices. "Zara's local EBIT (earnings before interest and tax) margin of about 25 per cent is also higher than the global Zara margin of about 21 per cent, likely driven by a higher gross margin," write the analysts.
Zara's operating cash flow of $33.3 million flows virtually straight through to EBITDA of $31.5 million, "assisted by supplier-funded working capital".
The company's stock turn here of 8.5 times "is well above local speciality apparel retailers" covered by Deutsche.
Basically, Zara is running rings around the local competition on every score, finding Australian consumers make more profitable customers than the global average. And it's not doing it with an unfair tax advantage. Unlike some of the more obvious multinational tax avoiders, Zara's tax bill of $7.8 million is right on the 30 per cent corporate tax rate.
Deutsche says industry feedback is that Zara is yet to have an impact on Australian retailers, with some locals benefiting from the higher foot traffic that a nearby Zara store brings.
However: "Long-term we are concerned, particularly with more fast-fashion brands [yet] to arrive in Australia."
Michael Pascoe is a BusinessDay contributing editor.