February 7, 2023

For most of 2022, the fashion industry has been waiting for the arrival of the other shoe. We’re still waiting.

There was the plethora of merchandise retailers and brands going into the year. Already high inflation reached levels not seen since the early 1980s. Russia ceased to be a viable market for most Western brands almost overnight when it invaded Ukraine. Rate hikes, a stock market slump and round after round of tech layoffs all threatened to cool consumer demand for fashion. China’s economic engine faced its biggest threat in decades from the country’s Zero Covid policy. The UK and much of Europe teetered on the brink of what some economists believe will be a long, deep recession.

But during this period, there has always been just enough good news to save the fashion industry from utter despair. The US has so far managed to avoid a recession (although a majority of economists continue to predict regularly in surveys that it is only a matter of time). China has eased its Zero Covid policy, raising hopes that its huge market will reopen soon as the inevitable wave of disease subsides.

And most importantly, consumers don’t seem to share the doom-and-gloom mentality of economists and fashion executives. On Friday, the University of Michigan said the US consumer confidence index reached 59.7 in December, down from 70.6 a year ago but higher than in November and above economists’ average forecast. The Conference Board’s widespread measure of how Americans feel about the economy rose to an eight-month high in December, according to data released Wednesday. And a Wednesday survey by the Confederation of British Industry reported an 11-point increase in consumer demand in December, compared to a 19-point drop in November. Forecasters had predicted a drop of more than 20 points this month.

Experts say the upswing can be attributed to declining inflation; In November, consumer prices rose by 7.1 percent from a year ago, compared to an increase of 7.7 percent in the previous month.

Retail sales tell a similar story. The headline figure, which shows purchases of everything from televisions to watches to washing up liquid, was down 0.6 percent in the US and 0.4 percent in the UK in November compared to the previous month. In the US, sales of stores specializing in clothing and clothing accessories fell by a relatively mild 0.2 percent.

How can the fashion industry prepare for a market that can’t decide if it’s in recession? Nike, which reported quarterly results earlier this week, is an instructive example of how to deal with the ups and downs of the economy.

Shares of the activewear giant plummeted in September after it reported a typical pandemic mix of bad news, including late-arriving and off-trend merchandise and weak sales in China. The company was transparent about the painful rounds of rebates it would take to get rid of its excess inventory.

On Tuesday, Nike said it had made progress in curbing its glut and reported stronger-than-expected sales and earnings. The stock soared and is now trading higher than it was in September.

The good news from Nike had a halo effect across the industry, with fashion stocks surging almost across the board. The retailer showed that excess inventory can be a temporary problem, rather than a throwback to the bad old days of year-round discounts. Nordstrom, American Eagle, Vince and Urban Outfitters Inc. also underlined their efforts to reduce inventory in recent earnings calls.

If retailers can improve their inventory position in early 2023, they’ll be in a much healthier position for a strong year overall, analysts say.

“The bull case for 2023 remains focused on post-holiday clean inventory levels and margin visibility,” Wells Fargo retail analyst Ike Boruchow wrote in a note published Wednesday.

China’s reopened economy may be another tailwind. Retail sales fell 5.9 percent year-on-year in November. But some analysts are predicting some sort of recovery for next year as the country has started easing its Zero Covid policy.

“Our base case forecasts single-digit retail sales growth in 2023, a modest increase from a low in 2022, which was hit hard by ongoing pandemic restrictions and testing requirements,” credit rating agency Fitch wrote in a Nov. 24 study. report.

It’s worth reiterating that economists are still saying a recession next year is likely in most major economies, if not globally. That will be tough on fashion brands, even brands like Nike that have moved on from the disruptions of the pandemic. But for now, many retailers are focused on the silver linings.

THE NEWS IN BRIEF

FASHION, BUSINESS AND THE ECONOMY

Irving's firing comes as sportswear brands face increasing public scrutiny for the actions of their high-profile employees.

Nike Reports Strong Sales; shares rise. Nike sales rose 17 percent to $13.32 billion during that period, surpassing an average estimate of $12.57 billion. Earnings of 85 cents per share for the second quarter ended November beat estimates of 64 cents, according to data from Refinitiv, Reuters reports.

Swiss watch exports soar to record highs on US and Qatari demand, but China is slumping. Shipments rose 10.9 percent last month to a monthly record of 2.4 billion francs ($2.6 billion), the Federation of the Swiss Watch Industry said Thursday. Total exports from January to November amounted to 22.9 billion francs, up 11.9 percent and heading for the industry’s best year ever.

Moncler Genius relaunches with showcase in London in 2023. The luxury outerwear brand’s ‘Genius’ program – with which Moncler has rolled out no less than eight capsule collections a year since 2018 alongside guest collaborators such as Valentino’s Pierpaolo Piccioli, Crag Green and Simone Rocha – will return after a hiatus in 2022. be announced.

Superdry positive about the second half of jacket sales rise to record. The fashion retailer reported sales growth of 3.6 percent in the first half of the year, but made a cautious comment on the outlook as the industry tries to weather rising costs and a deepening cost-of-living crisis in the UK.

Tesco faces legal claim over working conditions at Thai garment factory. A group of migrant workers from Myanmar allege poor working conditions at a Thai factory that made clothes for Britain’s largest retailer.

THE BUSINESS OF BEAUTY

Revlon colourstay makeup palettes.

Revlon’s bankruptcy plan would wipe out shareholders and transfer ownership to lenders. The company entered into a restructuring support agreement Monday with a critical lender group and its official committee of unsecured creditors, filings show.

PEOPLE

Centenera's first issue as editor-in-chief will be published in March 2023.

Christine Centenera appointed editor-in-chief of Fashion Australia. The renowned stylist and current fashion director of Fashion Australia will replace Edwina McCann in the publication’s top job.

MEDIA AND TECHNOLOGY

Christian Louboutin Shoes.

Amazon may be responsible for allowing Louboutin fake ads, says EU court. Louboutin filed two lawsuits against Amazon in 2019 alleging that the company regularly displayed ads for red-soled shoes that were marketed without Louboutin’s consent.

Composed by Joan Kennedy.

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