American consumers are satisfied. On February 15, the Commerce Department reported that the country’s shoppers spent 3.8% more in January than in December, undeterred by rising inflation and COVID-related uncertainty. That was the fastest monthly increase in nearly a year. Part of this waste is being spent on new clothes.
In other latitudes, too, clothing vendors are booming. In Britain, fashion was the only segment to see online sales grow last month on a year-on-year basis, according to capgemini, a consultant. As the catwalks and cocktail parties moved from New York, which held its Fashion Week in mid-February, to London, where another has just wrapped up, the mood in the clothing business is as bright as the pastel colored dresses that are in fashion this season.
luxury brands like Christian Dior (owned by LVMH, a colossus of luxury) or Gucci (part of kering, another French group) are relatively immune to economic turmoil. People who can afford their dresses may take a hit in a recession, but they rarely end up shirtless. The same cannot be said for less luxurious fashion houses. But they too have been on a hot streak lately.
Ralph Lauren, a relatively luxury American brand, opened 40 new stores in the third quarter of last year alone, including a flagship store in Milan, as well as stores in Atlanta, Chicago, Detroit and Miami, often on those cities’ fancier shopping streets. . Your CEO Patrice Louvet believes that consumers will continue to update their wardrobes and says that his company “is back on the offensive”.
In the mass market, sales of Hennes & Mauritz (H&M), a fast fashion giant, are back to pre-pandemic levels and profitability is better than it has been in years. Helen Helmerssonwho took over as CEO in January 2020, just before COVID-19 hit Europe, has announced that it wants to double the Swedish group’s sales by 2030 and achieve an operating margin of over 10% in three years. , compared to less than 2% in 2020 and 7.7% in 2021.
Helmersson and Louvet reflect an optimism in the industry as it emerges from the disruptions caused by the pandemic. But they shouldn’t overdo the champagne during the upcoming Fashion Weeks. Apparel companies, particularly those that cater more to the masses, face a variety of challenges. Some of these, like digitization and sustainability, predate COVID-19.
The pandemic has only piled on more challenges, from supply chain bottlenecks and skyrocketing shipping costs to worker shortages. On top of that, the whims of the world’s most populous autocracy mean one misstep can cost businesses a fortune. sales of H&M on China plummeted last year after the company raised concerns about allegations of forced labor in the Xinjiang region.
The success of fashion retailers last year was fueled by unusual circumstances that will not last. The pent-up demand triggered a wave of “revenge shopping” when stores finally reopened, particularly for “garments for special occasions” (slang for expensive items). Buyers’ pockets were full of infusions of government cash. And the pandemic was the final nail in the coffin for some weaker companies, reducing competition in the crowded market; top shop, Laura Ashley and TM Lewin sank in Britain, and ann taylor, Brooks Brothers and J Crew They did it in the United States.
Now that consumers are no longer receiving government checks and have tidied up their wardrobes anyway, they may be getting stingier.
Unlike the wealthy clients of luxury brands, who barely notice that a bag that cost $5,000 in 2019 now costs $8,000 (as happened with Chanel’s Classic Flap in November), those of market brands mass can resist higher prices. The necessary investments in digitalization and sustainability (Helmersson launched a vegan collection and invested in Sellpy, a digital platform for trading second-hand clothes) will affect the profitability of fast fashion houses.
younger models
As for the competition, some old brands may be gone, but some new faces look much more threatening to the mass-market giants’ market share. Companies like Sheina Chinese super discounter, the British asos or the german zalando have greater digital acumen than primarily offline firms H&M and Inditex, its Spanish archrival and owner of brands such as Zara.
They are also finding ways to appeal to young fashionistas. All of this may be why analysts are forecasting a more modest increase in sales of H&M than Helmersson’s, of around 50% by 2030, and less comfortable margins. The price of its shares, such as that of Inditexis below where it was before the pandemic.
In his annual report on the state of the clothing business, McKinsey, a consultancy, predicts that discount and luxury fashion will continue to surprise investors this year. Mid-market retailers may enjoy another season or two of “revenge shopping”. After that, his prospects look more worn.
Source: Gestion
Kingston is an accomplished author and journalist, known for his in-depth and engaging writing on sports. He currently works as a writer at 247 News Agency, where he has established himself as a respected voice in the sports industry.
