Moderate sector growth in a challenging market environment
The premium and luxury goods sector faced further challenging macroeconomic conditions and slow consumer activity last year, particularly in the emerging markets. Performance was depressed throughout the year by the political tensions in Russia and Hong Kong, more stringent anti-corruption laws in China and weak economic data from Europe. Nonetheless, the sector succeeded in continuing its growth and enjoyed an upward trend of 5% after currency adjustments according to a study by industry association Altagamma and consultancy firm Bain & Company. This was primarily due to the positive development in retailing, to which the online channel made an above-average contribution. In the wholesale channel the sector suffered from challenging market conditions and the rationalization of small retail companies, which was particularly pronounced in Europe. Negative currency effects influenced many companies’ sales and profit performance, particularly in the first half of the year. The womenswear segment showed a slightly stronger development overall than menswear.
Tourism boosts otherwise weak sector development in Europe
In Europe, currency-adjusted sector growth of 2% in large parts of the region was affected by the mixed general economic conditions and correspondingly weak demand. Retail customer footfall was down in many cases. The UK market grew despite this, while the German apparel market shrank. In Eastern Europe, the sector felt the effects of the protracted Ukrainian conflict, which were also reflected in a falling number of Russian tourists in other parts of the European region. Nevertheless, tourist demand rose overall and continued to spur market growth particularly in the metropolitan regions of Western and Southern Europe.
Market development in the Americas gains momentum over year
After a muted start to the year, the premium and luxury segment of the clothing industry in the Americas picked up as the year progressed. Sales in the region rose in total by 6% in local currencies compared to the prior year. First, the recovering economy and rising consumer confidence were reflected in robust local demand in the U.S. Second, growth was boosted by increasing demand from Chinese and Latin American tourists. The sector grew more slowly in Latin America itself, with the Brazilian market in particular suffering from a gloomy consumer climate.
Declining market development in China puts pressure on sector in Asia
The contribution made by Asia to sector growth proved to be much lower last year than was originally expected. The growth adjusted for currency effects of 5% was spread unevenly across the region. In China, slower macroeconomic growth, the consolidation in the property sector and more muted consumer confidence in the wake of the government’s anti-corruption legislation put pressure on the sector’s development. Sales of luxury goods on the Chinese mainland actually declined slightly overall. Including demand from Chinese tourists, however, China remained the country with the highest share of global sales even in the past year. In Southeast Asian countries and Japan, for example, the industry benefited from the rising number of tourists from China. In contrast, growth in Hong Kong slowed significantly, in particular as a result of mounting political tension. In Japan, the sector expanded by 10% in local currency thanks to solid demand on the part of domestic consumers and the growing number of tourists.