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Retail Intelligence ReportApparel

October 2019

Table of contentsTable of contents

2

Profit & Loss report

Global industry trend

Research findings

Net income & revenueof apparel brands

Global retail & ecommerce trend

Global apparel market trendGlobal apparel market trend

3

Value of the Global Apparel Market: 2018 – 2022, $ Million USD, current priceValue of the Global Apparel Market: 2018 – 2022, $ Million USD, current price

Value of the Apparel Market: Compound Annual Growth rate (2018 – 2022)Value of the Apparel Market: Compound Annual Growth rate (2018 – 2022)

Source: https://shenglufashion.com/2018/02/18/statistics-global-apparel-market-2018-2022/

295,

397

270,

643

54,8

01

66,0

38

63,3

70

55,6

70

37,1

06

34,8

63

35,0

61

28,6

39

27,1

59

24,3

68

21,7

77

15,0

51

16,2

34

16,0

87

14,9

61

13,2

27

10,1

67

9,75

4

10,7

50

9,08

2

7,76

0

8,57

3

7,93

2

312,

411

277,

236

64,3

32

65,9

26

63,1

71

56,8

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38,3

35

34,4

25

34,4

08

29,5

93

27,6

87

24,4

22

22,6

44

16,2

35

16,6

72

16,2

70

15,5

24

13,6

40

11,3

89

10,7

97

11,0

90

9,10

5

8,27

0

8,67

2

8,13

7

325,

572

283,

625

76,6

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62,7

09

57,9

42

40,6

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94

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83

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11,4

95

9,15

3

8,80

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8,72

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8,35

5

2018 2020 2022

8.8%

7.8%

6.4%

5.8%

5.3%

5.0%

4.5%

4.2%

3.8%

3.5%

3.2%

3.0%

2.5%

2.3%

2.1%

1.9%

1.9%

1.9%

1.8%

1.8%

1.7%

1.7%

1.6%

1.6%

1.4%

1.3%

1.3%

1.2%

1.1%

1.0%

1.0%

0.8%

0.8%

0.7%

0.5%

0.4%

0.3% 0.2%

0.0%

-0.1

%

-0.1

%

-0.3

%

-0.4

%

-1.0

%

-6.00%

-3.00%

0.00%

3.00%

6.00%

9.00%

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Indo

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Viet

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Mex

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Aust

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Emira

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Nor

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USA

Turk

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King

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Den

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Aust

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Hon

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Value of the Global Apparel Market: 2018 – 2022, $ Million USD, current price

Value of the Apparel Market: Compound Annual Growth rate (2018 – 2022)

Global apparel retail trendGlobal apparel retail trend

4

Global apparel retail industry value forecastGlobal apparel retail industry value forecast

1,312 1,380 1,453 1,533 1,620

5.0%5.2%

5.3%5.5%

5.7%

4.4%

4.8%

5.2%

5.6%

6.0%

0200400600800

1,0001,2001,4001,6001,800

2018 2019 2020 2021 2022

€ Billion % Growth

The value of the global apparel retail market totaled €1,280 billion in 2017 (52.6% womenswear, 31.3% menswear and 16.1% children’s wear), up 4.9% from a year earlier and is forecasted to reach €1,600 billion in value in 2022, an increase of 29.7% since 2017. The compound annual growth rate of the market between 2017 and 2022 is forecasted to be 5.3%

The Asia-Pacific region accounted for 37.1% of the global apparel retail market in 2017 (up from 36.8% in 2015), followed by followed by Europe (28.5%) and the United States (23.6%).

Four key markets – France, Germany, Japan and Italy – are all forecast to shrink by 2021

Source: https://shenglufashion.com/2018/12/18/market-size-of-the-global-textile-and-apparel-industry-2016-to-2021-2022/; https://www.commonobjective.co/article/the-size-of-the-global-fashion-retail-market

Global apparel retail industry value forecast

E-commerce clothing segmentWorldwide revenue by Billions of USD

E-commerce clothing segmentWorldwide revenue by Billions of USD

Global apparel e-commerce trendGlobal apparel e-commerce trend

5

10 largest e-commerce markets in 2019By billions of USD

10 largest e-commerce markets in 2019By billions of USD

U.S.$561

China$740

Brazil$16

Canada$44

UK$93

Germany$77

France$55

Russia$19

Japan$87

South Korea$69 $317 $362

$403$441

$475

0

100

200

300

400

500

2018 2019 2020 2021 2022

Source: https://www.shopify.com/enterprise/ecommerce-fashion-industry; https://www.fibre2fashion.com/industry-article/8240/global-apparel-marketoutlook-for-2019

The current year 2018 has seen world apparel players witnessing store downsizings and lesser retail growth but increase in sales due to digital market presence. This effect has fuelled changes in the approach of the market players and this will continue in 2019 too with more emphasis on the growth of e- commerce, mobile shopping and meeting ever rising expectations of personalization among customers.

From 2019-2022, the global prediction is that online platforms, like Amazon, will experience at least 5 times more revenue compared to 2018. While consumers frequent websites to compare prices and products, global online platforms are expected to expand their fashion brand partnerships and develop additional engagement methods to stay competitive in the cut-throat digital shopping space.

10 largest e-commerce markets in 2019 E-commerce clothing segment

Profit & Loss report – FY18Profit & Loss report – FY18

6

Brand names

Zara, Pull&Bear,Massimo Dutti,Bershka,Stradivarius,Oysho, Zara Home, Uterque

Club Monaco,Polo RalphLauren.

Old Navy,Banana Republic,Athleta Inc, Forth & Towne, Hill City

Gucci, Yves SaintLaurent, BottegaVeneta, Balenciaga,AlexanderMcqueen, Brioni,Boucheron,Pomellato, DoDo,Qeelin, Vertbaudet, Ulysse Nardi,n Sowind Group

Dockers,Signature by Levi Strauss, Denizen

Hermes horizons,Petit h, John Lobbshoes, CristalleriesSaint-Louis, Puiforcat, Shang Xia, CreationsMetaphores, Verelde Belval, Bucol, Le Crin

COS, Weekday,Monki, H&MHome, & Otherstories, Afound,ARKET, Cheap Monday

Market Cap (€) 75.89 bn 6.46 bn 6.01 bn 56.87 bn 57.41 bn 6.09 bn 64.84 bn 26.14 bn

Headquarter Arteixo, Galicia,Spain

Madison Avenue, New York, USA

San Francisco,California, USA Milan, Italy Paris, France San Francisco,

California, USA Paris, France Stockholm, Sweden

Employees 174,386 23,500 135,000 13,556 34,795 15,100 14,284 177,000

Source: Company Annual ReportsExchange rate 12-Aug-19 : $1 = €0.89

Profit & Loss report – FY18Profit & Loss report – FY18

7

Financial

Revenue (est.) €26.15 bn €5.64 bn €14.81 bn €3.14 bn €13.67 bn €4.97 bn €5.97 bn €19.63 bn

Cost of goods €11.33 bn €2.17 bn €9.16 bn €0.88 bn €9.23 bn €2.30 bn €1.79 bn €9.28 bn

Gross profit €5.46 bn €3.47 bn €5.65 bn €2.26 bn €4.44 bn €2.67 bn €4.178 bn €10.34 bn

Gross profit % 21% 62% 38% 72% 32% 54% 70% 53%

Operating profit/loss €4.36 bn €0.50 bn €1.22 bn €0.32 bn €3.94 bn €0.48 bn €2.05 bn €1.44 bn

Operating profit/loss % 17% 9% 8% 10% 29% 10% 34% 7%

Net Income €3.45 bn €0.43 bn €0.90 bn €0.21 bn €3.72 bn €0.25 bn €1.41 bn €1.51 bn

Net Income % 13% 8% 6% 7% 27% 5% 24% 8%

E-commercerevenue €3.14 bn - €3.13 bn - - €0.65 bn - €2.8 bn

Source: Company Annual ReportsExchange rate 12-Aug-19 : $1 = €0.89

Operating

Own Stores 7,490 501 3,194 634 1,439 3,000 310 4,968

Net income and revenue of apparel brandsNet income and revenue of apparel brands

8

14.1 13.8 14.2 14.8

3.5 3.2 3.1 3.14.8 5.2 5.5 6.0

20.9

23.325.3 26.1

2015 2016 2017 2018

Revenue – Billions in €

GAP Prada Hermes Zara

0.80.6

0.8 0.9

0.3 0.3 0.2 0.2

1.0 1.1 1.21.4

2.9

3.23.4 3.4

2015 2016 2017 2018

Net Income – Billions in €

GAP Prada Hermes Zara

Source: Company Annual Reports

Research FindingsResearch Findings

9

CurrentLVMH:

The world’s largest luxury goods conglomerate revealed that revenue for the full year amounted to a whopping 46.8 bn euros, an increase of 10 percent over the previous year. It has 4,592 stores and 156,088 employees. Net profit for the year 2018 amounts to €6.4bn an increase of 18%.

FutureLVMH:

A unique operating model anchored by six pillars:

1. Decentralized Organization 2. Vertical integration 3. Sustaining savoir-faire 4. Organic growth 5. Creating Synergies6. Balance across business segments and geographies

CurrentGucci::

Gucci indicated that online sales, which were equivalent to 6% of retail sales, grew 70% in 2018 and also that they are still below average in China, meaning Gucci still has room to grow with a customer base which includes “all age groups.”

In 2018, Gucci set a new profitability record, and accounted for more than 80% of the Kering group’s operating profit, worth €3.944 bn.

FutureGucci:

Gucci to launch a high jewellery line “which will further strengthen Gucci’s positioning at the highest end of the spectrum.” The label also wants to strengthen its position in the travel retail channel, where it is “under-represented.” The goal is for travel retail to account for at least 10% of Gucci's total revenue.

Source: https://uk.fashionnetwork.com/news/Gucci-remains-Kering-s-main-cash-generator-in-2018,1067496.html#.XVfQiW8zZPY

Research FindingsResearch Findings

10

CurrentHermes:

The Group’s consolidated revenue amounted to €5,966 m, up +10.4% at constant exchange rates and +7.5% at current exchange rates. Recurring operating income increased 6% to €2,045 m (34.3% of sales). Net profit increased 15% to €1,405 m.

The Group is largely made up of woman (68%).“The Hermes Group has shown very strong growth over the past six years – with sales up on average by 10% per annum. At the end of December, currency fluctuations represented a negative impact on revenue of €160 m.

FutureHermes:

Hermès does not look at celebrity endorsements as a brand building tactic and has actively stayed away from this form of marketing (a practice that is quite common in the LVMH brand stables). The very fact that only A-list celebrities and the ultrawealthy can afford and get access to their most premium and exclusive products is an authentic endorsement of the brand

Hermès does not follow strategies of launching region-specific collections or product offers. The same product collections are sold everywhere in the world.

CurrentInditex:

Net sales for the year €26.1bn. Like for like sales growth of 4% and online sales as % of total 12%.

As of year-end 2018, it had a network of 7,490 stores in 96 markets and was selling its fashions online in 156 markets. 85% of all stores eco-efficient (100% in China).

FutureInditex:

Inditex has put in place a new RFID-enabled stock management in Zara stores in 25 markets, including Spain, France, Italy, China, the U.S., the U.K. and Mexico, that allows that brand to fulfil online orders from stores, the company also said. All Inditex brands will adopt that system by 2020 in the countries where they run a physical store.

Apart from this Inditex also has projects such as 1. Click&Collect service- Self service checkouts 2. Automated online order pick-up points 3. Same-day / Next-day delivery 4. Eco-efficient stores

Source: https://martinroll.com/resources/articles/strategy/hermes-the-strategy-behind-the-global-luxury-success/;https://www.inditex.com/documents/10279/619384/Inditex+Annual+Report+2018.pdf/08ed7885-969d-94ff-5abf-6f10d0315fbf