With the entire fashion industry reeling under the COVID-19 effects, could the luxury industry remain unaffected? Hardly, says the latest study by McKinsey & Co in association with Italy’s Camera della Moda and trade show organizer Pitti Immagine. The study says, he personal and experiential luxury business, valued at €390 billion in 2019, is likely to decline almost 45 per cent by 2020-end while the leather and accessories goods sector is likely to decline by around 35 per cent. Since January 1, 2020, global luxury apparel and fashion segment has lost almost 40 per cent of market capitalization with retailers losing revenues worth 50 percent of their market capitalization.

Global luxury sales to fall as shoppers shun stores

Around 31 per cent of the 2,100 executives interviewed by McKinsey expect global sales of luxury goods to drop by around €140 billion in 2020 and by €150 billion by 2021. This can be attributed to the fact that 50 per cent of luxury shoppers now prefer to spend time with their loved ones rather than buy desirable goods. Buyers also prefer to buy sustainable goods from local and nearby shops rather than from big brands.

E-commerce to pique sales

E-commerce is likely to gain ground with around 24 per cent shoppers opting for online channels to gain their first luxury shopping experience. Brand promotions with commitments to fight COVID-19 are some of the factors driving these consumers towards online shopping. The research states, jewelry, watches and eyewear are likely to be some of the categories most affected by the pandemic with consumers delaying their purchases of these for later date. Around three quarters of consumers expect to resume their pre-COVID-19 luxury spending habits after the emergency, but 80 percent of them plan to adopt special measures to prevent infections.

Wholesalers to face liquidity crunch, increased digital competitions

Amongst various categories, 46 per cent of independent wholesalers are expected to face liquidity crunch and aggressive competition from global online retailers offering early discounts on spring 2020 collections ranging from 30 to 40 per cent. As digital channels have become a key support for these luxury brands, developing partnerships with specialized e-tailers will help them to provide good service and meet their shoppers through different touch points. The survey states, COVID-19 has also disrupted traditional fashion calendar digital events. Designers and brands are also planning to reduce the size of their collecteion besides organizing shows closer to in-store sales

Value creators versus value destroyers

The problem of excess inventory is also likely to compound this season with unsold inventory accounting for 150 per cent of expected spring/summer ’20 sales. Labels having strong fashion content and a limited directly controlled distribution system will be more affected than established brands. COVID-19 will also widen the polarization between value creators and value destroyers in the industry with the former accounting for 177 per cent of its profits.

Abercrombie & Fitch Co’s indirect wholly-owned subsidiary, Abercrombie & Fitch Management Co.plans to offer up to $300 million aggregate principal amount of senior secured notes due 2025 (the “Senior Secured Notes”) in a private offering exempt from the registration requirements under the Securities Act of 1933, as amended.

The Senior Secured Notes will be guaranteed on a senior secured basis, jointly and severally, by A&F and each of the existing and future wholly-owned domestic restricted subsidiaries of A&F that guarantee or will guarantee A&F Management’s existing senior secured asset-based revolving credit facility.

The Senior Secured Notes and the related guarantees will be secured by a first priority lien on certain of A&F Management’s, A&F’s and the other guarantors' real property, intellectual property, equipment, equity interests in A&F Management and the guarantors other than A&F, and general intangibles, subject to certain exceptions and permitted liens, and by a second priority lien on security interests in accounts and credit card receivables, inventory, deposit accounts, securities accounts, intercompany loans and related assets, which security interests will be junior to the security interests in such assets that secure the Amended ABL Facility.

A&F Management intends to use the net proceeds from the offering of the Senior Secured Notes to repay all outstanding borrowings under A&F Management’s existing senior secured term loan facility, to repay a portion of the outstanding borrowings under the Amended ABL Facility, and to pay fees and expenses in connection with such repayments and the offering of the Senior Secured Notes.

A number of major fashion brands—including Esprit, Gap Inc., and H&M Group—have cut ties with a major alpaca wool producer. High street retailer Marks & Spencer has also announced that it will phase out alpaca wool. This follows the release of an animal cruelty exposé.

Animal rights organization People for the Ethical Treatment of Animals (PETA) released the “first-of-its-kind” undercover investigation.

The exposé revealed instances of abuse documented at Mallkini. The Peruvian farm is the largest privately-owned alpaca wool producer in the world.

The footage shows workers holding crying alpacas by the ears. The workers roughly shear the animals with electric clippers. In the video, some alpacas vomit. Workers also slammed the alpacas onto tables. Some of the animals are pregnant.

After being shorn, the alpacas appear visibly cut up. Some appear to have deep wounds, some of which are bleeding. According to PETA, workers sewed the wounds up without using pain relievers.

Stein Mart Inc is the latest retailer to hint at COVID-induced challenges that could precede a tour through bankruptcy court.

The off-price chain issued a going-concern warning in its annual report filed with the Securities and Exchange Commission, though it has struggled since at least 2018, with factors in the past year predicting financial turmoil ahead.

Stein Mart sought to head off its liquidity problems by selling itself to Stratosphere Holdco, an entity to hold the operations, and other related assets for parent firm Kingswood Capital Management in a deal inked on Jan. 3. But when the coronavirus pandemic hit, Stein Mart and Kingswood mutually agreed to terminate their merger agreement on April 16. Under the terms of their agreement to end the planned transaction, neither party will be required to pay the other a termination fee.

In completing the final audit for the year ended Feb. 1, Stein Mart’s independent auditor KPMG said in a letter to shareholders and the company’s board that the temporary closure of all stores due to COVID-19 caused a material adverse effect on the company’s sales, results of operations, liquidity and cash flows. The impact raises substantial doubt over the company’s capacity to continue operations.

The International Apparel Federation (IAF) is launching the first Digital Global Apparel Sourcing Expo 2020 for the ready-made garment industry together with Sourcing Journal as media partner. The Global Apparel Sourcing Expo will be powered by Foursource, who will provide the technological platform for the event with a specific focus on B2B matchmaking.

The show will be launched on the July 15 and will run for 30 days until August 14, 2020. The IAF already has a strong existing partnership with Foursource, the largest digital sourcing platform for the apparel industry. Other than traditional tradeshow event software solutions, Global Apparel Sourcing Expo will benefit from Foursource’s B2B matchmaking technology with proven success in connecting international buyers and readymade garment manufacturers.

Exhibitors will benefit from a powerful tool to personalize their company booths and profiles with dedicated product showrooms and verified company certificates through Foursource’s partnerships with GOTS, OEKO-TEX, Textile Exchange, WRAP and many others. Participating companies will be showcased to a global network of thousands of international buyers along with extensive digital marketing to promote exporters publicly, maximizing traffic on the tradeshow and securing relevant business opportunities.

Welcoming the decision to reduce value added tax (VAT) on all kinds of yarn from Tk4 to Tk3 per yard in the proposed budget for fiscal 2020-21, the Bangladesh Textile Mills Association (BTMA) has demanded that VAT be removed altogether on all yarn.

It also urged the government to raise the existing alternative cash assistance from 4 per cent to 10 per cent for six months to compensate for the losses faced by export-oriented textile mills due to aggressive promotional strategies by competing nations.

The association earlier proposed waiving VAT on all kinds of yarn as the industry had lost around Tk20,000 crore during the COVID-19 lockdown imposed by the government, it said in a press release.

A fixed Tk6 ad valorem VAT has been proposed to be imposed on yarn produced from man-made fibres (MMF) that, the association thinks, will not benefit the related textile mills due to a dearth of export orders for yarn and buyer shortfall the textile mills have been plunged into. Therefore, BTMA urged a reconsideration of the proposal and clamping of a Tk2 ad valorem VAT on every MMF yarn.

Having 1,900 stores, US-based Target has decided to extend the pay and benefits of its various US team members. Applicable from 5 July, it will permanently raise its starting wage to US $ 15 per hour. Now that’s 25 per cent higher than the US industry average.

The company will also give a one-time recognition bonus of $ 200 to its frontline store and distribution centre hourly workers for their efforts during the pandemic. The retailer is investing around $1 billion more on team than it did in 2019, and additionally will introduce free virtual healthcare visits for all and extend benefits established for the pandemic.

Apart from all these, the employees, especially team members who are vulnerable, will get additional extensions of a 30-day paid leave, besides being provided free backup care for family members.

Vietnam’s National Assembly has approved a free trade agreement with the EU on June 8 which is expected to help make the country a new investment destination for manufacturers looking to leave China. The EU-Vietnam Free Trade Agreement (EVFTA) has already been ratified by the EU, making Vietnam the second south-east Asian nation to have such a trade treaty with the European bloc after Singapore. The EVFTA creates competitive pressures on goods and services from the EU for Vietnamese businesses, goods and services.

Once the agreement takes effect, 71 per cent of exports from Vietnam to the EU will become duty-free, as will 65 per cent of EU shipments to Vietnam. Of the remaining tariffs, up to 99 per cent will be phased out by Hanoi over 10 years and by Brussels over seven years. The trade deal is expected to make the bloc a bigger buyer of Vietnamese goods, rising from its current share of about 15 per cent. Particularly strong growth is expected for apparel and footwear, which account for roughly 20 per cent of Vietnam’s exports.

India-based integrated textile manufacturer Vardhaman Textiles has launched a new range of fabrics with anti-viral and anti-bacterial properties. The 'Travel Shield' range of fabrics are water and stain repellent, breathable and easy to care. The fabrics will help in mitigating the risk of COVID-19 when these are used for making garments.

The new range of fabrics comes in multiple variants – 100 per cent polyester, 100 per cent viscose and a blend of cotton and polyester to provide the customers a better performing, soft and easy-care product.

For the new range, Vardhman has partnered with the pioneers of health care finishes, HealthGuard, an Australia based company for developing several healthcare finishes like anti-viral, anti-bacterial, anti-dust etc. Health Guard AMIC is 99.94 per cent effective against killing coronavirus (H1N1, ISO18184 tested), SARS and influenza virus. It remains active on treated fabric even after 20 home laundering.

These fabrics make travel safer, comfortable and stylish. They are also washable and reusable unlike nonwovens.

The UK Fashion & Textile Association (UKFT) has urged the UK government to provide Tradeshow Access Program (TAP) grants to eligible brands to attend virtual tradeshows. Additionally, UKFT has also ensured that the grants will be made available to companies which have exhausted their access to the TAP scheme.

UKFT believes in current challenging times, companies should get an opportunity to test out the virtual tradeshow route as these platforms have great functionality. These shows enable buyers and sellers to meet online. Traditional platforms work best for buyers and sellers who know each other already but virtual tradeshows attract new buyers by creating a curated edit of brands and products to the platforms, according to a UKFT press release.

The first virtual tradeshow releases are expected to be Playtime (running on Playologie.com for children’s wear; Pitti Uomo (running on Pitti Connect) for menswear, accessories and footwear; Pitti Bimbo (running on Pitti Connect) for children’s wear, accessories and footwear; Cabana Miami Swim (running on Joor) for swim, beachwear, cruise and resort; Premium and Seek Berlin (running on Joor) for menswear, women’s wear, casual wear, accessories, jwellery, footwear; Project NYC and MRket NYC pending decisions from the organisers (running on Nuorder.com) for menswear, women’s wear, children’s wear, accessories, footwear, resort.

UKFT recommends that companies hold off on making a decision on whether to use the virtual platforms until they receive confirmation that they are eligible for a grant. Once accepted for a grant, UKFT will refer these companies to the correct people to apply for the right part of the platform.