Apparel and Footwear: Quarterly Statement Q3 2020

August 2020

Early July 2020, Euromonitor published revised forecasts for Apparel and Footwear for 2020-2024 that considered the implications of the novel coronavirus COVID-19. Overall, COVID-19 is expected to severely suppress global demand for Apparel and Footwear in 2020, but the virus’ effects are expected to be markedly different across different categories and channels. A strong rebound is expected in 2021, but pre-Covid-19 revenues are not expected to be fully recovered until 2022.

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Key Findings

Revenues collapse amid lockdowns

  Apparel and Footwear global retail revenue estimates for 2020 have been downgraded by USD319 billion. The industry is expected to post double digit decline in 2020 as a result of global retail lockdowns. Lower than expected footfall across most markets after reopening, has evaporated any hopes for “v-shaped” or swift recovery during H2 2020.

Covid-19 exposes retail inefficiencies

Despite higher than average e-commerce penetration, Covid-19 has exposed serious retail inefficiencies within the apparel and footwear space. Several big profile apparel and footwear retailers have gone bankrupt over the last quarter, and many others are expected to follow. On the other hand, players with a highly developed digital presence and those operating on a DTC basis have navigated the crisis best.

Quarantine lifestyles erode occasion and formal wear

  Standstill of business travel and working from home arrangements have impacted formal apparel and footwear in a greater extent. Men’s and Women’s Suits are among the worst performing categories. Limited social interaction within the context of social distancing and the delay of celebrations of all sorts have added further pressure on already struggling categories pre-Covid-19.

Heavy discounting pushes prices and profits margins down

The combination of skyrocket inventory levels and record low sales have pushed the vast majority of brands and retailers into discounting frenzy. The strategy has proved unsuccessful during Q3 with most consumers still wary to spend on non-essential references despite more favourable pricing. As seen post-2008 financial crisis, weaning consumers away from this always on discount habit is challenging, risky in terms of brand equity and detrimental for profit margins.

  

Few pockets of growth to exploit across categories and markets

  Covid-19 is having a widespread effect across all markets and categories. Yet, Q3 has untapped though some pockets of growth. Value for money fashion propositions, off-price retail, e-commerce and DTC operators have proved to be way better equipped to navigate the downturn.

Introduction

Scope
Euromonitor International and COVID-19: forecasts and analysis
Apparel and Footwear Quarterly Update Methodology
Demand for Apparel and Footwear is fairly elastic
Apparel and Footwear COVID-19 data and reporting timeline
Key findings

Drivers

Key drivers shaping apparel and footwear during Q3
Retail closures affect disproportionately fashion retail during Q3
Consumers on quarantine shift to comfort and leisure wear
Heavy promotional activity further erodes retail revenues

Macroeconomic Update

Global economy will contract sharply in 2020
In our baseline view, the pandemic peaks in summer 2020
Three scenarios examine the impact of a more severe outbreak
Our view in short
Forecast real GDP growth in 2020 under different scenarios

Q3 Apparel and Footwear Update

Demand contraction wipes out USD319 bn vs. January 2020 estimates
Childrenswear and sportswear fares best amidst the downturn
Widespread drop across both emerging and developed markets

Opportunities and Conclusion

Pockets of growth
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