The fashion industry benefited from the economic reopening in 2021 and generated attractive returns for the main companies in the business, although 2022 will depend on the recovery of employment and consumption.
Louis Vouitton, the French luxury brand company, has a 41.32% increase in the year in the price of its shares, which trade at 722 euros on the Paris Stock Exchange, while H&M (Hennes & Mauritz), the producer textile, which is listed on the Stockholm Stock Exchange, has a slight increase of 3.55% in 2021.
Inditex, the Spanish firm, owner of brands such as Zara or Pull & Bear, among others, has a yield of 8.10% per year on the Madrid Stock Exchange and its shares are sold for 28.15 euros.
Other US textile companies in the clothing and footwear industry have moderate returns, such as American Eagle with 15.94% increase in 2021, or Nike with 17.11 percent.
The laggards in the year are Adidas, in the Frankfort Stock Exchange, whose papers lost 15.44% in the year, as well as the American Gap, which fell 14.41% this year on Wall Street.
Carlos Hernández, senior analyst at Masari Casa de Bolsa, said that “particularly, these companies are from the consumer discretionary sector, which implies that as economic cycles expand, companies would also be sensitive. Another way of looking at it is that as people’s income increases, so does their consumption ”.
“By 2022, firms will benefit as the economic recovery trend continues, if the Omicron variant generates lockdowns again, then the clothing sector will be more negatively impacted. Furthermore, all these companies are classified as a recurring consumer sector, where the behavior of the sector is reflected with the aggregate consumption metrics ”, explained Amín Vera, deputy director of Economic Analysis at Black Wallstreet Capital.
In general, he said, “we have the perspective that 2022 will continue to be a year of economic recovery, as long as there are no new isolation measures in society.”
The BWC specialist concluded that “the difference is in the ability of these firms to adapt their broadcast channels, although they already all have the option of selling online, but not all do so with the same success, as is the case with Nike and Adidas ”.
The rise in raw materials does not necessarily affect their production costs, since they are minimal unit costs. Rather, the issue of marketing is what they cost the most for these companies, the specialists agree.
“The cost of production, on average, is less than 5% quarterly, doing it is not what it costs, what really weighs on these brands are the continuous marketing campaigns that they handle,” said Vera.
Departmental benefit
On the other hand, department store chains were among the most affected by the pandemic during 2020 due to the social distancing measures applied by governments to reduce the spread of Covid-19 among the population, as well as due to closures and closures of premises.
However, in 2021 the firms have recovered strongly.
Macy’s, the department of New York, leads the gains on Wall Street with 121.78% in the year and is trading at a price of 24.86 dollars per share.
Tesco, the UK-based retailer, has a profit of 24.79% and is sold at 288.35 pounds per share, while the also British Marks & Spencer, records a gain of 63.76% in the year to sell at 223.20 pounds per share .
“It is important to see that they were among the companies hardest hit during the pandemic. However, now that demand remains under robust growth rates, particularly in the United States, it is natural to see expansion in operating and stock market terms of these companies, ”said Carlos Hernández.
He added that “online shopping will continue to be a continuous expansion channel. Although the most relevant of all this will be to try to maintain margins without having to affect operating volumes from higher prices due to inflation ”.
Challenges towards 2022
Amín Vera explained that “the entire fashion and textile sector, in general, is assembled in Southeast Asia, which has had problems with the supply chain, which delays the delivery times of the maquiladoras.”
According to the stock market analyst, this is a very sensitive sector to the supply chain, as well as to the consumption and employment levels of the population.
According to Carlos Hernández, “inflation impacts companies in general due to costs and margins, which could generate a restructuring of very short-term growth plans; however, the outlook continues to be favorable for the sector ”.
The Masari Casa de Bolsa specialist does not rule out “a market correction in share prices during the first quarters of next year, as a result of financial valuations and risk-free rate changes.”
Reference-www.eleconomista.com.mx