European fashion retail shows resilience in H1, even after Grexit threat

Tuesday, 08 September 2015

European fashion retailers have proved their resilience over the first half of the year, despite the currency fluctuations affecting their interests in foreign markets and in spite of the political and economic turmoil in Greece. Big surprises in the period come from the far ends of the Old Continent, with Lithuania and Estonia leading the way and Bulgaria

suffering the aftermaths of neighbouring Russia and Greece problems.

The first six months of the year have been, if any, thrilling. With monetary fluctuations weighting the stock exchanges around the clock almost on a daily basis and political unrest whipping even the furthest village in Europe and the bordering regions, once again, fashion retail has shown its stronger than other industries, proving a renewed capacity for endurance in both the European Union (EU) and the Eurozone.

Both turnover and volume of sales in fashion retail have increased by 2.6 percent in the first 5 months of 2015 in the European Union, while within the Eurozone it still grew, although slower (+2.2 percent).

FashionUnited data shows that Euro has remained stable throughout this period, helping the European fashion and apparel retailers to get through the storm. Sales have shown a sustained growth rate over the first half of the year in the EU - an average monthly improvement rate of 1 percent -, recovering from a minor decline in January of 0.3 percent.

However, European retail did not develop in consistent way among most EU members. Only Italy, the Netherlands, the UK and Norway experienced stable increases, in a range comprehended between 1.3 percent and 2.7 percent. Meanwhile, Romania and Bulgaria saw their fashion retail industry decrease with respectively 1.1 and 6.7 percent dips.

Remarkable increases were noted in Denmark, Germany, the Czech Republic, Hungary, Sweden, and Poland, whose sales increased by 5.9 percent on average.

Germany, the EU´s largest economy, saw fashion sales advance a total 5 percent during the first half of 2015. Actually, the German fashion retail just suffered a negative month in terms of sales: March (-1.7 percent). Other than that, Germany´s fashion sales grew steadily.

But the biggest surprise were Lithuania, who adopted the Euro on January this year, and Estonia. Both countries enjoyed a 10.6 percent increase in their national fashion sales on average.

Lithuania and Estonia put their best foot forward in H1

Lithuania has turned to be one of the biggest surprises of the European fashion world in the first half of the year. The growth in the country has been boosted by their adoption of the euro in January this year. Also, an ongoing improvement in real disposable income and employment has contributed to the economic growth in the country.

Additionally, inflation remains low and overall economic growth appears steady, with monthly increases for the latter (January -1.6 percent, February +5.6 percent, March +0.4 percent, April -1.9 percent. May +6.7 percent, June +1.6 percent).

Likewise, Lithuanian economy improvement can also be linked to the good development of its neighbouring country, Estonia. A recent report from the European Central Bank (ECB) revealed that Estonia has the lowest state debt, which is 9.6 percent of its GPB (compared to 94.4 percent average in the EU, 170.2 percent in Greece and 40 percent in Lithuania, as shown by data compiled by Bloomberg).

It is also noteworthy that fashion is highly seasonal in the Baltics due to big temperature differences during the year, as the Baltic States are known for rather nice summers and really cold winters.

What does this imply for the fashion industry? Basically that apparel shopping has to be done for every season, although spring and autumn fashion can be worn underneath winter layers, while pieces can hardly be worn during a full year. This explains volatility in fashion retail sales, and a rise in sales during the winter months and summer months, highlight market insiders.

In this vein, Lithuania used to manufacture most of their own fashion, but due to their entry to the European Union and their recent adoption of the Euro, their fashion production plummeted. Now, total retail sales in Lithuania are composed by both sales of local designers and international fashion brands, which are increasingly opening stores in Lithuania.

Estonia is even more popular among international fashion retailers, mainly because of its growing economy.

Biggest fashion players remain stable, with 1.3 percent improvement on average

Biggest and most influential players within the European Fashion Industry in Europe remain unchanged, with Italy, Spain, France, and the UK leading the way. UK’s development remains stable and develops at a similar pace than that of the EU with -0.3 percent in January, +1.6 percent in February, +0.1 percent in March, +2.0 percent in April, -0.3 percent in May, -0.5 percent in June.

All of them reported increased turnover for the first semester, with the British fashion industry noting a 2.6 percent jump, France´s growing by 1 percent and Spain improving slowly, adding a 0.3 percent. Data gathered by FashionUnited offer and indication of how the country´s current economic situation, high unemployment rate and country debt have slowed down growth.

The latter was specially indicative in January (-1.7 percent), February (-0.7 percent) and June (-2.2 percent), it saw fashion retail sales rise in May with 2.8 percent.

In comparison, France had been rather volatile, showing variations between 0.1 percent and 2.6 percent: January -2.6 percent, February +2.3 percent, March -1.4 percent, April +2.6 percent, May +0.1 percent, June +0.1 percent. According the latest released statistics, the value of the fashion turnover in France developed simultaneously with the volume of the fashion turnover, meaning that sales and price changes did not have any effect fashion retail, highlights data provided by the National Institute of Statistics and Economic Studies of France (Insee).

Italy remains the most stable country in terms of fashion retail development

Stable and similar to EU on average. January -0.3 percent, February +0.8 percent, March +0.2 percent, April +0.3 percent, May +0.9 percent, stress data collated by FashionUnited.

Greece suffers the consequences of long-lasting economic downturn and ‘Grexit’

Greece has witnessed a dire fall in turnover for the fashion and apparel industry of 36 percent since 2010. On the bright side, sales have been stable for the past 3 years, even in spite of the economic instability (adding 3.6 percent in the first six months of the current year).

Before the crisis hit in 2011 and 2012, Greece had even sales of fashion, but in December, 2010 there was a downfall of 12 percent in fashion sales, while the recession came in at 16 percent during 2011. Finally, in 2012, another 7 percent backlash was taken by the Greek fashion industry in term of sales.

By the end of the first half of 2015, sales were 0.4 percent lower than in the first half of 2012, as stated by data offered by Eurostat and the Hellenic Statistical Authority.

Nonetheless, the economic instability experienced during the first six months of the current year prompted steep changes on a monthly basis: January 2015 (+8.4 percent compared to December, 2014 due to more trust in the country because of Jan, 25 referendum), February -1.3 percent, March -1.5 percent, April -1.8 percent, +4 percent in May, -3.5 percent in June (also related to the approaching of the deadline set for payment of first interest batch set by the ECB). In summary, total sales came in a 0.3 percent behind those of total first-half sales the year before.

Infographics: crgdesign.com
All data: FashionUnited Business Intelligence

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