Closed stores and stock that cannot be sold: the havoc that corona will wreak in the fashion retail is becoming increasingly apparent. New studies now predict which chains will be the first to fall…
Turnover down by a third
The polarisation in fashion retail, that was already in progress before the corona crisis, is being intensified by the virus that holds the whole world in its grip, McKinsey reports in a study in cooperation with Business of Fashion. 2020 already was a year that was feared by fashion retailers, but projections now show the virus will push fashion turnover down by 27 to 30 % this year – and even by 40 % for luxury fashion retailers. For those who are still standing, 2021 would show a return to growth.
In the first three months of this year, fashion players have already lost 40 % of their market value. If stores are forced to remain closed for two more months, four in every five listed European and North-American fashion retailers will struggle financially. A “large number of global fashion companies” will go bankrupt before the end of next year, a gloomy press release predicts.
Superdry and Ted Baker: over and out?
An AskTraders study is more specific: analysing the British fashion retailers, they have listed all the fashion chains facing the biggest risk of collapsing. Featured in that list are Superdry and Monsoon Accessorize, who according to the researchers will “likely” not survive the corona crisis.
Among the corona victims will not only be stores and brands that were already struggling before the current crisis, but also (and more particularly) those who are just not strong enough to face this pandemic. Twenty British retailers are in the “endangered” list, along with shopping centres who have seen their income from rent drop down to zero.
The icon that is Marks & Spencer is said to have a 50/50 chance to survive, as are Next and Ted Baker: all of them have had to issue profit warnings before the virus hit and they have seen their share price plummet. Still, AskTraders’ analysts think they do have a realistic chance of survival.
A recession-economy
However, the new state of the world will induce a lot of changes, McKinsey’s analysts argue: the whole supply chain is collapsing and especially the developing countries (where public health services are unable to handle the crisis and poverty is widespread) are hit the hardest. Employees in countries like Bangladesh, Ethiopia and India will have to face long stretches of unemployment, leading to sickness and hunger – which will have consequences for global production.
Typically in a crisis, consumer confidence will stay low even after the emergency is lifted and price-consciousness, restraint and a lower demand will continue to last for a good while. Just as after the financial crisis of ten years ago, a real recession-economy will boost both the demand for discounts and low prices, as well as demand for innovation, sustainability and responsible consumption…
