1. For Internal Discussion Purposes Only1 Feasibility of ZARA in Peru Market Seeking Opportunity Erin Bereit Tarun Hingorani Matthew Raffa Taras Sanow Jonathan Solis

2. For Internal Discussion Purposes Only2 Peru represents the next logical step in our strategy for the Americas Existing Footprint Local Demand for Goods Profitable  We have operated in South America since 1998.  Distribution centers in Argentina, Brazil, and Mexico.  Lima population over 8 million.  Target customers annual clothing and footwear expenditure $390 million in 2010 and doubling in 10 years.  Store profitable within first 2 years of operation.  Total net benefit of $13.0 million over the first 7 years of operation. Macroeconomic Stability  Stable exchange rates and low rates of inflation.  Continuous GDP growth per capita. ZARA

3. Overview of Inditex / ZARA Inditex HQ in Arteixo, Spain $14.7 billion in operating revenues (2009) 4,607 stores, 8 brands, 74 countries ZARA Flagship brand of Inditex First Store in 1975. 1,680 stores in 72 countries (2009) $9.1 billion in operating revenues (2008) Goal of 80% of stores outside of Spain in 2020 (Current 55%). For Internal Discussion Purposes Only3 ZARA

4. For Internal Discussion Purposes Only4 Inditex has been operating its ZARA brand in South America since 1998. CountryZARA Stores (FY 2008 Year End) Argentina7 Brazil25 Chile6 Colombia7 Uruguay2 Venezuela11 Total59 Regional Distribution Center(s) Argentina Brazil Mexico Source: Inditex FY 2008 Annual Report. ZARA

5. For Internal Discussion Purposes Only5 Inditex has been operating its ZARA brand in South America since 1998. CountryZARA Stores (FY 2008 Year End) Argentina7 Brazil25 Chile6 Colombia7 Uruguay2 Venezuela11 Total59 Regional Distribution Center(s) Argentina Brazil Mexico Source: Inditex FY 2008 Annual Report. ZARA

6. For Internal Discussion Purposes Only6 Why invest in Peru? Lima is 4 th largest city in Latin America Bilateral free trade agreements e.g. US, China, and EU (currently negotiating) Political stability Legal environment conducive to investment Investment grade bond rating Largest GDP growth in region in 2010 (6%) ZARA

7. Macroeconomic stability leading to… ZARA For Internal Discussion Purposes Only7

8. Increasing FDI ZARA For Internal Discussion Purposes Only8

9. 9 ZARA will operate in a unique, sustainable position within the Peru Clothing and Footwear Marketplace Mango HQ in Spain Currently 5 retail stores in Lima (6 total in Peru) Currently pursuing a move in market position. Topitop HQ in Peru Inexpensive semi- fashionable retailer General Domestic Retailer Provide service to mass market Cheap Fashionable Expensive Plain Generic Domestic Retailer Mango Topitop ZARA

10. For Internal Discussion Purposes Only10 ZARA – Resources & Capabilities Competitive Advantage Effective Team of Designers Predominately Company-owned Distribution System Presence at High-end Retail Locations Fast Fashion Image Frequent Apparel Updates Low Advertising Costs 10,000 Designs Per Year Fashion & Cost Conscious Customers Selective Outsourcing of Basic Manufacturing Appearance of Scarcity Latest Trends Spotting Team Production in Europe Quick to Market ZARA

11. Proposed Operating Plan Company owned store Locate in Lima’s upper end shopping district (Larcomar) Country management team Local employees for day-to-day operations Utilize existing regional distribution centers Open 3Q 2011 ZARA For Internal Discussion Purposes Only 1Q 102Q 103Q 104Q 101Q 112Q 113Q 11 Recommend Market Expansion Country Management Team Local Staff Construction Stocking Implementation Real Estate Contracting Permitting Strategy Zara in Peru 11

12. For Internal Discussion Purposes Only12 Key Assumptions  Average cost of new store in new market is $1.6 million.  Size of store = 1,380 square meters (firm’s system-wide average).  Annual cost of prime real estate in Lima is $37 per square meter ($51,000 per year).  Ninety (90) employees are needed to service Peru.  Avg. monthly salary per employee is 3,500 Nuevo Sols ($1,100)  COGS is 43 percent of sales revenue.  SGA is 20 percent of sales revenue.  Corporate tax rate (existing and future) is 30 percent of profit.  Tariff rate is 17 percent of the value of imports (merchandise)  Cost of capital is 6 percent.  Amortization period is 20 years. ZARA in Lima will break-even in 2 years and total net benefit of $13.0 million over the first 7 years of operation. Peru - Conservative Current Mexico Current Chile 20110.1%0.9%1.4% 20120.3%1.8%2.7% 20130.35%1.8%2.7% 20140.4%1.8%2.7% 20150.4%1.8%2.7% 20160.4%1.8%2.7% 20170.4%1.8%2.7% Scenario Market Shares for Total Clothing and Footwear Spending ZARA

13. Questions? ¿Preguntas? ZARA For Internal Discussion Purposes Only Thank You Gracias 13

14. Sources ZARA For Internal Discussion Purposes Only 14

15. Sources ZARA For Internal Discussion Purposes Only 15

16. For Internal Discussion Purposes Only16 Market Expansion Considerations Macroeconomic stability Urban economic development Relative ease of market entry Local demand for clothing Cost of doing business (taxes & tariffs) Accessibility of distribution centers Availability of prime retail space Profitability within two years of operation ZARA