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Looking ahead to 2024, fashion industry leaders see headwinds ahead and are for the most part uncertain about what the new year will bring to their companies.
That’s the assessment from a recent report from consulting firm McKinsey & Co., which predicts retail sales growth of 2%-4% in 2024.
“In 2024, the industry is expected to bear the impact of fluctuations in demand that have punctuated the past few years,” the McKinsey report says. “It is during such times that supply chains experience a ‘bullwhip effect,’ in which small sales variations cause high levels of volatility, leading to factory underutilisation, layoffs and delayed infrastructure investments.”
The luxury segment is expected to experience higher growth than in non-luxury: 3%-5% compared to 2%-4%. However, that’s still below the firm’s 2023 projection for luxury of 5%-7%. A challenging economic environment caused by waning consumer confidence and declining household savings is seen as the culprit.
While growth in luxury goods is expected to slow in China and European markets, it is expected to expand a bit in the U.S., according to McKinsey.
And though fashion industry execs see economic volatility and inflation as, respectively, their second and third biggest risks to growth, their number one concern is geopolitical instability. McKinsey conducted the survey with The Business of Fashion, an industry trade publication.
Execs are also divided on prospects for the industry going forward. While 26% expect conditions to improve year over year, 37% see them staying the same, while 38% believe they will worsen.
Consumers should be prepared to pay more next year for clothing with 69% of execs planning prices increases. Twenty-five percent of execs plan price increases of 5% or more wile 44% expects to hike price between 1% and 5%.
Selected luxury brands: LVMH Moet Hennessy (OTCPK:LVMHF)(OTCPK:LVMUY), Kering (OTCPK:PPRUF)(OTCPK:PPRUY), Compagnie Financière Richemont SA (OTCPK:CFRHF)(OTCPK:CFRUY), EssilorLuxottica Société (OTCPK:ESLOF)(OTCPK:ESLOY), Pandora (OTCPK:PNDZF)(OTCPK:PANDY), Tapestry (NYSE:TPR), Capri Holdings (NYSE:CPRI), and Vera Bradley.
Selected non-luxury brands: PVH Corp. (PVH), G-III Apparel Group (GIII), Ralph Lauren (RL), Kontoor Brands (KTB), Lululemon Athgletica (NASDAQ:LULU), Levi Strauss (LEVI), Columbia Sportswear (COLM), and FIGS (FIGS),
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