Down but not out: the crisis is holding fast fashion back – Lifestyle
Emmanuelle Michel with AFP offices in New York, Tokyo and Stockholm (Agence France-Presse)
Madrid, Spain ●
Fri, June 12, 2020
Zara, H&M and Gap may be slowly reopening their stores, but the coronavirus outbreak has had a devastating financial impact on the fast fashion sector, which needs a radical overhaul to recover, experts say.
Nearly 40% of companies in the sector expect the impact to be “significantly worse” than that of the 2008 financial crisis, according to a survey by Euromonitor International.
He expects clothing and footwear sales to fall at least 12% this year.
Global leader Inditex, the Spanish group that owns fashion chain Zara, posted a first-quarter loss of 409 million euros on Wednesday, its first loss since going public in 2001.
With 88% of its stores closed at the height of global containment, the group saw its sales practically halved.
But the group, which has a solid financial situation and whose shares have held up well, has continued to pay its employees throughout the crisis without having to put them on short-term leave via a partial unemployment scheme.
His rivals, however, weren’t so lucky.
Primark has laid off nearly 8,000 of its employees in Spain and Mango has done the same for its 4,700 employees, according to the Workers’ Commissions Union (CCOO).
Sweden’s H&M still has “tens of thousands of employees” on short-term furlough around the world, a spokesperson said, predicting second-quarter losses after sales fell 46% in March.
The chain slowly reopened its roughly 5,000 stores, but at the end of May 1,350 were still closed.
Around 68,000 employees at British budget fashion chain Primark have benefited from furlough benefits through various government schemes across Europe, “without which we would have been forced to lay off the most”, admitted the general manager George Weston in a statement.
Between March 22 and April 21, the brand had sold “nothing”, he said.
US retailer Gap also reported a loss of $900 million in the first quarter.
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With stores now open, Japan’s Uniqlo said it recorded “solid” sales in May after a month in which they fell 60%, while Inditex said it saw a “gradual recovery” with around three quarters of its stores open.
But the recovery will be long.
“Brands find themselves with huge stocks on their hands,” said Benjamin Simmenauer, a professor at the French Fashion Institute in Paris.
“It’s hard to bounce back because fashion is so dependent on the seasons, with collections changing so quickly.”
Above all, the crisis has thrown the global supply chain into chaos. Some groups have canceled orders from their Asian suppliers, causing huge problems for local garment workers.
And in the short to medium term, consumers’ appetite for fashion “is going to be quite diminished due to the decline due to the sharp reduction in disposable income”, said Euromonitor analyst Marguerite Le Rolland in a point of view. current press.
But there will also be other factors.
“(The) fun and social aspect of shopping for fashion is going to be very difficult to maintain with the social distancing measures in place,” she said.
The crisis has undeniably fueled a shift towards online sales. They have seen a lockdown boom with interest from new consumer groups, such as the baby boomer generation, she said.
Most of the fashion groups saw their online sales soar, with Inditex seeing its first quarter sales increase by 50%, Gap recording a 13% increase while H&M’s sales increased by 17% in the first quarter with larger increases in April and May.
The sector must also take into account the type of fashion sought by consumers.
After months of being locked up at home, will they be looking for sophisticated outfits for a night out on the town, or will they stick to comfortable loungewear and sports equipment, sales of which have increased during the lockdown .
“There is total uncertainty on this issue,” said Simmenauer who believes that one way or another the epidemic and the confinement “will leave its mark on the style”.