Clothing companies are doing well despite declines in demand for clothes

The shares of the 10 largest European high street fashion companies have increased by 24,9% over the last year, and the shares of the Polish company LPP have gone up more than the shares of Inditex or H&M. The industry is doing quite well despite falling demand. Clothes prices in Europe have stabilized, and in Poland they have fallen by 1,4% since the beginning of the year.

The clothing industry in Poland and Europe

High street fashion is an important element of the landscape of the European fashion industry. This group includes brands such as Zara (Inditex), H&M and Reserved (LPP). Thanks to their high adaptability, they managed to successfully navigate through pandemics and a period of cost increases related to global inflation. They also respond to the needs of consumers who increasingly want to buy online rather than in standard stores. Customers also demand greater care for the environment and the well-being of employees producing clothes. The current economic situation and consumers limiting their spending remain a challenge for many companies.

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After a period of significant increases, clothing prices on the European market have stopped going up. According to data GUS, in Poland over the last 12 months (until the end of August 2023), the prices of clothes and footwear increased by 6,7%. However, this is the result of price increases in 2022, because since the beginning of 2023, prices have fallen by 1,4%. And only in August clothes became cheaper by 0,7%. Retail sales of clothing and footwear are also falling, at constant prices in August they were by 4,9%. lower than the year before.

We can observe similar trends throughout Europe, where inflation is falling significantly

At the same time, due to the economic situation, consumers are limiting their spending, including on clothes. In such a situation, companies high street fashion they are doing quite well. Shares of the 10 largest listed European companies in this industry have increased by 24,9% over the last year. This industry performed better than the broad one Stoxx 600 European share index, which at the same time gained 9,2%, and the 10 largest luxury brands increased their capitalization by 16%.

The leader in growth over the last year was the shares of the Polish company LPP, which doubled in value. At the same time, Inditex shares increased by 38,2% and H&M - by 32,5%. At the other extreme were the shares of large online clothing retailers - ASOS shares fell by 36,8%, and Zalando - by 8%. While over the last 12 months the industry has managed to more than double the broad European share market (Stoxx 600 index - 9,2%), in previous years the industry's results were much worse than the market. In the long term, luxury clothing companies performed much better, with their shares increasing by over 3% over the last 85 years.

Stock performance of individual companies in the industry high street fashion

The average covers the top 10 largest UK and European mass fashion retailers by market capitalization. Data as of October 4.10.2023, XNUMX. Source: Refinitiv, eToro's own calculations

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.