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Coronavirus makes fashion industry go out of style

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Miguel A. Rodriguez
Miguel A. Rodriguez
14 September 2020
Luxury-goods brands might go out of business due to the pandemic.

The pandemic drove the $2.5 trillion fashion business into the abyss.

According to Business of Fashion and McKinsey, the global fashion sales will drop 30% in 2020, while a 40% drop in sales will hit the high-end part of the market. If stores are closed for two months, due to the emergency state, approximately 80% of public fashion companies will experience financial problems. If we were to compare the luxury goods market with the overall stock market, the first had a more significant drop than the whole stock market – a 40% decrease just in the first trimester of 2020.

For example, in the UK alone, analysts believe that high street fashion worth more than £10 billion gathers dust in warehouses because major British companies such as Primark, Arcadia, Peacocks stopped taking new deliveries. 

MGFI – the McKinsey Global Fashion Index expects not only for the fashion companies to be disabled by the pandemic, but also for the department store giants, venture-backed startups, and high street brands: “We expect a large number of global fashion companies to go bankrupt in the next 12 to 18 months.”Burberry is on the suffering luxury goods companies list, alongside Coach’s Tapestry, because affluent buyers don't travel and spend anymore. Between 20%-30% of the industry's revenue comes from purchases outside the homeland.

The total workforce, which is higher than 300 million people, has been put on hold, not only the high street but also the cheaper garment workers found in Bangladesh, India, and Cambodia.

But the virus didn't only affect stores, but fashion shows as well. The world-renowned Armani held the Autumn-Winter 2020 show via a live stream, with no real audience. The Italian fashion house did this to "support national efforts in safeguarding public health."

In China, the Shanghai Fashion Week scheduled to take place between March 2 and April 1, has been postponed indefinitely.  It is another hit for the fashion industry, as the Chinese consumers are the biggest buyers in the world – for last year alone, there are responsible for 90% of the luxury market growth.

The overall sales for the current spring season fell by 70% compared to the same period last year. 


Sources: linkedin.com, theguardian.com, edition.cnn.com


This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest. The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided. 

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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.