The State of Fashion 2022

Content from part of this report:

”With much of the world under Covid-19- related restrictions through 2020 and 2021, the global fashion industry has faced exceptionally challenging conditions. But after nearly two years of disruption, the industry is beginning to find its feet again.
Despite ongoing headwinds, there were signs by mid-2021 that things were taking a turn for the better, particularly in markets where vaccination rates were high.

In the US, the release of pent-up demand created spikes of so-called “revenge buying,” leading to a growth spurt that echoed an earlier phenomenon in China. Return-to-work and occasion styles topped consumer shopping lists. But the pandemic has only served to exacerbate inequalities in performance that have become a persistent theme over recent years. A small group of leading brands is equalling, and in
some cases already surpassing, their pre-pandemic performance. This should not, however, be confused with a universal return to form. Large numbers of companies will continue to struggle to create value —
and, in some cases, to survive — as the bruises of the crisis linger on.

The few brands that outperformed either played into the needs of the moment — comfort, outdoor activities, and online shopping — or appealed to wealthier cohorts who were able to better weather
the impacts of the crisis. Companies that couldn’t align with these market features tended to struggle,
and the list of casualties grew longer as the pandemic continued through 2021. Indeed, the fashion C-suite has been an uncomfortable place to inhabit for much of the past year, illustrated by the rising numbers of takeovers and bankruptcies.

After a hiatus in last year’s edition of The State of Fashion, we return to our roster of fashion “Super Winners” — the top 20 listed companies by economic profit. The proportion of value destroyers
(companies generating a negative economic profit) in 2021 was higher than ever. Moreover, the losses
of the bottom 80 percent in terms of value creation more than offset the profits of the top 20 percent.
This year’s Super Winners group is dominated by sportswear brands, luxury players, and home-grown Chinese companies, all of which outperformed the wider market. From a geographic perspective, China recovered to 2019 levels of economic activity much faster than the rest of the world. Chinese demand was fuelled by an appetite for local shopping, particularly in the luxury segment, as consumers who faced travel restrictions shifted to domestic alternatives.

Looking ahead to 2022, in aggregate, McKinsey Fashion Scenarios suggest global fashion sales will reach 96 to 101 percent of 2019 levels in 2021 and 103 to 108 percent in 2022. Still, while overall sales are expected to make a full recovery next year, performance will vary across geographies, with growth likely driven by the US and China, as Europe lags. In addition, international tourism remains in the doldrums, and the shape of consumption will continue to evolve, sparking a growing focus on domestic spending. In response, many companies will recalibrate their retail footprints, even amid uncertainty as to whether these pandemic-induced behavior shifts will stick…….”


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