Sales decline this year due to uncertainty leading to political instability at the end of the year
All-out inventory turnover rate and 2025 SS strategy shift… Outlook for the ‘new normal’
The fashion industry is experiencing difficulties in securing performance momentum due to increased internal and external uncertainty this year due to high inflation and high interest rates, as well as abnormal climate and political instability.
Until the third quarter of this year, major fashion companies had received sluggish performance reports compared to the previous year, and expected a special year-end special and a rebound in the fourth quarter, but the fashion industry is taking a direct hit first. Fashion companies plan to actively respond by changing their strategies, such as securing inventory turnover through large-scale discounts for the remainder of the year and reviewing next year’s business plans.
According to the ‘2024 Sales Trends of Major Retailers’ by the industry and the Ministry of Trade, Industry and Energy on the 22nd, the decline in fashion and clothing was noticeable this year. It is going downhill from August (-17.8%), September (-16.0%), and October (-9.8%).
The performance of major domestic fashion companies is also not good. In the third quarter alone, Samsung C&T (-36.36%), Shinsegae International (65.4%), Handsome (-31.4%), and Kolon FnC (-50.5%) fell one after another.
The sales environment in the fourth quarter is not easy due to the long hot weather caused by abnormal weather and the added political uncertainty at the end of the year. An industry official complained, “The fashion clothing industry is at a serious level even though it is a season in which fourth quarter sales must be focused on as it determines the year’s performance.”
The biggest problem is inventory turnover. In particular, in the outdoor industry, where the winter season is the main focus, it is said that there is a high possibility that half of the year’s sales will remain in inventory, as the turnover rate is about 2 times.
An outdoor industry official said, “Due to the shrinking outdoor market in recent years, each company is not producing a large quantity. “As the ‘responsive production system’ has become established, the inventory turnover rate has also improved,” he said. “However, it is true that there are inventory variables this year due to issues such as weather and politics.”
Fashion brands have also begun controlling production and inventory management. This is because we have to respond to the 2025 SS season starting in February, and a decline in operating profit due to winter inventory costs is inevitable.
An industry official said, “As the strength of ‘YONO’ stands out due to the economic recession and the impeachment situation, there is a possibility of expanding the off-season, but it is also time to respond to spring products in February.” “We are responding strategically to the inevitable negative impact on operating profits such as rain, logistics costs, and management costs.”
The industry predicts that political risks such as the presidential election in the first half of next year and a prolonged slump in the industry will lead to a ‘new normal’ through extreme polarization and reorganization.
It is predicted that extreme consumption patterns will continue between the ‘premium’ luxury goods market centered on so-called VIPs, which are not affected by the consumption downturn, and the ‘cost-effective’ SPA market centered on ultra-low prices. As a result, it is expected that fashion companies will be reorganized with securing each brand as their main source of sales.
An industry official said, “As it is difficult to expect growth in the fashion market next year, it is expected that a review of the business plan will be inevitable from a conservative perspective.”
(Seoul = News 1)
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