Western Europe apparel & footwear sector spend
Western Europe apparel & footwear sector spend
The apparel sector has been deeply affected by COVID-19. As we publish on the European apparel retailers we leverage 11 UBS Evidence Lab datasets and our own detailed modelling to explore broader post-pandemic sector debates and quantify the scale of changes ahead.
Our base case assumes total Western Europe apparel and footwear spend takes 3 years to recover to 2019 levels. Our estimates are 9% below 2019 levels in 2021 and 2% below in 2022. Given the level of uncertainty still, we model different scenarios: the upside case is a full recovery by 2022; he downside case assumes no full recovery even by 2025.
Our forecasts reflect our analysis of cyclical factors (LT relationship of market growth to GDP), structural factors (impact of store closures and changes in event related apparel spend like holidays), pricing (the sector is deflationary on value and fast fashion) and supply (permanent store closures as some retailers exit the market / downsize). This leads us to conclude that while the recovery is likely to be slow, the impact on individual retailers will not be uniform and will open up opportunities for the strongest retailers.
We expect online to drive more of the longer term recovery than in store sales…
We expect online to drive more of the longer term recovery than in store sales…
The recovery in total market spend is only one piece of the puzzle though given different routes to market.
We see online as the main driver of sector spend after 2022, with stores contributing more to growth in 21/22 from a lower base.
Our forecasts imply offline spend doesn’t return to 2019 levels for at least the next five years and online penetration only drops slightly in 2021 before continuing to rise, despite the material increase in 2020. We believe our 2021 online forecasts are marginally lower than those published by other industry bodies reflecting the more bearish outlook in a recent UBS Evidence Lab UK consumer pulse survey in which 32% expect to reduce the amount spent online post COVID vs now (Jan'21). Like our overall sector forecasts, our online forecasts are driven by analysis of cyclical factors, structural factors (the value of essential clothing spend moved online during store closures, 'normal' channel shift and reverse channel shift as stores reopen), pricing and supply (albeit less significant for online than offline).
