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Textiles Industry Report

Continued and broad-based deceleration

SENSITIVE RISK FOR ENTERPRISES

Last Update: July 2024

Strengths & Weaknesses

Strenghts
  • Reactive, flexible and integrated supply chains
  • Luxury and sportwear are strong segments in the sector
  • Innovative sector both in terms of products and business models
Weaknesses
  • Highly cyclical sector 
  • Fashion retail is high concentrated 
  • Sustainability issues (labor, environmental impact etc.)

Sector Overview

What to watch ? 

  • Consumer confidence, wage growth and consumer credit
  • Developments of new business models (i.e. ultra-fast fashion) and new consumer trends (i.e second-hand)
  • Commodity prices (cotton, fibers etc.)
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Despite the inflationary backdrop in 2023, the non-luxury textile segment grew by +4% y/y in Europe and by +6.5% in China as demand was resilient. In the US, sales flatlined in 2023. In 2024, non-luxury sales are expected to grow by +1.5% in Europe, +1% in the US and +5% in China. The luxury segment fared much better in 2023 across regions with growth of +13.5% in Europe, +2% in the US and +9% in China. Nevertheless the momentum should slow down, with +4%, +3% and +5% expected in 2024 for Europe, the US and China, respectively.

Overall, consumer spending on fashion remains under pressure and trends such as ultra-fast fashion brands and the purchase of second-hand goods are only gathering steam. Although positive for sales volumes, ultra-fast fashion is contributing to pushing prices down and forcing the whole supply chain to adapt to an even faster pace, putting pressure on margins. The growth of the second-hand market is being boosted by online platforms and embraced by retailers that are introducing trade-in programmes for old clothes for sustainability and branding motivations.

Firms in the sector are also facing higher labor costs and higher prices for commodities and energy, which is weighing on profitability. However, despite this challenging environment, non-luxury companies posted a stable EBIDTA margin at 11% in 2023.

Subsectors

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Textiles: about 50% of industry turnover. Textile manufacturers serve mostly the needs of the clothing and home improvement industries, and to a lesser extent other industries (automotive, etc.)

Apparel: about 30% of industry turnover. Apparel manufacturers are mostly contractors to which large fashion retailers outsource the actual manufacturing of their clothes and accessories.

Leather and shoes: about 20% of industry turnover. Leather goods and shoes generally have distribution channels that are distinct from apparel.

Asia Pacific concentrates 80% of the industry's turnover, with China's share standing at 50-60% across most segments, the remainder being split between India, Bangladesh, Vietnam and Indonesia. Excluding Asia, Turkey and Mexico also have sizeable textile industries exporting to the European and U.S. markets, respectively. Some countries producing high end or technologically advanced fabric have kept a significant manufacturing base ( Italy, France, Germany, Japan in particular).

Cost-of-living crisis in major economies dashes hopes for a strong recovery

S

SENSITIVE RISK for entreprises

  • Fragmentation

  • Internationalization

  • Capital Intensity

  • Profitability

  • Fragmentation

  • Internationalization

  • Capital Intensity

  • Profitability

Updated in June 2023.
  • Reactive, flexible and integrated supply chains
  • Product segments with strong consumer appeal (luxury, sportswear)
  • Capacity to reinvent business models (fast fashion, ultra fast fashion)
  • Boom for personal protection equipment now over
  • Sensitivity to changes in consumer sentiment and income
  • Very strong pressure from a handful of large fashion retailers
  • A growing fraction of consumers relying on the second-hand market
  • Shift away from China for manufacturing proves challenging
  • Bad ESG publicity

What to watch ? 

  • Reshuffling of consumer spending in advanced economies
  • Changes in raw-material prices (cotton, synthetic fibers derived from oil and gas)
  • Changes in consumer preferences and business-model innovation addressing those changes
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In 2022, the global textile industry experienced a revival in demand, although it remained shy of reaching the heights seen prior to the pandemic in both production hubs and end markets. The industry now faces a challenging mix of persistently high costs for raw materials, a sweeping cost-of-living crisis and evolving consumer preferences, which collectively set the stage for a demanding landscape for the quarters to come.

With historically high inflation denting households' purchasing power, consumer spending on fashion is under pressure and secular trends such the rise of ultra-fast fashion brands and the purchase of second-hand goods are only gathering steam. While positive for volume growth, ultra-fast fashion is contributing to pushing prices down and forcing manufacturers, agents and wholesalers to adapt to an even faster pace, putting supply chains under additional pressure. Because it is conversely detrimental to volume growth, the second-hand market is increasingly being embraced by retailers that are introducing trade-in programmes for old clothes.

Among the most resilient end-markets, the sportswear and luxury goods categories are expected to continue to post above-average performance, but signs now abound that their growth has peaked. Similarly, the reopening of the Chinese market in the first half of 2023 has fallen short of expectations and its positive impact on demand appears to be short-lived.

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Textiles: about 50% of industry turnover. Textile manufacturers serve mostly the needs of the clothing and home improvement industries, to a lesser extent other industries (automotive, etc.)

Apparel: about 30% of industry turnover. Apparel manufacturers are mostly contractors to which large fashion retailers outsource the actual manufacturing of their clothes and accessories.

Leather and shoes: about 20% of industry turnover. Leather goods and shoes generally have distribution channels that are distinct from apparel.

Asia Pacific concentrates 80% of the industry's turnover, with China's share standing at 50-60% across most segments, the remainder being split between India, Bangladesh, Vietnam and Indonesia. Excluding Asia, Turkey and Mexico also have sizeable textile industries exporting to the European and U.S. markets, respectively. Some countries producing high end or technologically advanced fabric have kept a significant manufacturing base ( Italy, France, Germany, Japan in particular).

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