What happens when the fashion industry is hit by a pandemic? A must-read for fashionistas

The COVID-19 pandemic has taken a heavy toll on the global fashion industry including some iconic fashion brands. From big fashion retailers to small apparel makers, all have been adversely impacted as reduced consumer spending on non-essentials resulted in decreased demand and margins and forced many brands to either shut shop or declare bankruptcy. US retailers are on track to close c.25,000 stores this year and around 45 US retail companies have filed for bankruptcy so far this year. Brands including Brooks Brothers, Tailored Brands, Lucky Brand, JC Penny and ALDO have filed for bankruptcy in the wake of the pandemic. Retail M&A investments increased 71% in 1H20 from 1H19, with the investments focused on reconfiguring supply chains and adapting to the burgeoninge-commerce and omni-channel operations. Large shifts in consumer behaviour and preferences are expected to lead to some permanent changes in the industry. In this article, we discuss what brands can do to survive the pandemic and the opportunities that will unfold in the coming months.

Key Takeaways

  1. The global clothing and clothing accessories stores market is expected to shrink to USD1,245bn in 2020 from USD1,257bn in 2019, declining at a CAGR of 1%, mainly due to the pandemic-induced economic slowdown. The industry’s revenue could plunge more than 33% in 2020.
  2. Increasing margin pressure has severely impacted big retailers and forced them to restructure their business models.
  3. Some well-known fashion names filed for bankruptcy this year due to accumulated liabilities, lower consumer demand, lower footfall and negative growth rates. A silver lining is acquisitions or mergers/partnerships that have increased significantly in 2020. Companies strong enough to weather this crisis may consider acquiring undervalued companies.

Originally published at https://www.acuitykp.com.

Author

Pankhuri Goyal, Associate, DEP Investment Baking, is part of investment banking team and has over 5 years of work experience in IB support. She has worked on various Investment Banking tasks including company / industry research, detailed company profiles, case studies, benchmarking, valuations, peer analysis among others. She holds experience in multiple sectors such as Consumer/Retail, FIG, Healthcare, and Industrials.

Prior to joining Acuity, she worked with Cians Analytics in their private equity & consulting team and also worked with EY in their RMS team.

She holds a Post Graduate Program in Management with specialization in Finance and a bachelor’s degree in Economics.

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We write about financial industry trends, the impact of regulatory changes and opinions on industry inflection points. https://www.acuitykp.com/

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Acuity Knowledge Partners

Acuity Knowledge Partners

We write about financial industry trends, the impact of regulatory changes and opinions on industry inflection points. https://www.acuitykp.com/

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