Though most European brick-and-mortar clothing stores opened around four weeks ago, sales have been dismal. As per latest data published by the trade association Acotex, in April, clothing sales declined 50 per cent in the United Kingdom and by 67.4 percent in France. These sales further plummeted by 72 per cent year-on-year in May and by 45 per cent to date.

Huge cash reserves save Inditex despite declining sales

Some of reasons for declining sales are: the inability of people to visit stores in recent times, reduced socializing and a decline in consumers’ incomes. Recently, one of the largest fashion retailers Inditex reported a 44 per cent plunge in revenues in first quarter and also a net loss of €409 million.

However, the company’s online sales surged 50 per cent in the first quarter. The company expects online sales to represent over 25 per cent of its total sales by 2022. Despite its struggles, the company’s huge cash reserves enabled it to pay its staff without having to put them on short-term leave.

Government bailouts, short term leave to survive

Unlike Inditex, budget fashion chain Primark had to rely on government bailouts across Europe to pay its 68,000-strong workforce, while, Sweden’s H&M Group had to put tens of thousands of employees on short-term leave throughout the world. H&M also had to face the problem of burgeoning inventory of unsold goods during the lockdown. By the end of April, the brand had unsold inventory amounting to almost $4.2 billion.

According to Euromonitor International, around 40 per cent of the businesses in the sector expect the impact to be much worse than that of the 2008 financial crisis, while McKinsey estimates up to one-third of global fashion retailers to perish during the crisis.

Retailers are already feeling the pinch as big clients such as the UK’s Arcadia Group are cancelling orders and extending payment terms, the onset of the discounts trend could further cripple their already challenged finances.