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The State of Global Fashion and Luxury [Deloitte Report]

The Fashion and Luxury industry faced many challenges. In order to better and more timely respond to the rapid changes in the market,  businesses and global investors consider many trends in their strategies for the following years.

That’s why Deloitte provided the fifth edition of the “Global Fashion & Luxury Private Equity and Investors Survey” to analyze and measure market trends and expectations on M&A activities. So let’s see the results!

F&L Industry Insights and Perspectives

An analysis of the Fashion & Luxury industry’s performance was conducted on 81 companies, totaling almost $633 billion in sales in 2019.

Source: Global Fashion & Luxury Private Equity and Investors Survey 2021, Deloitte report

The sales index for the top players in F&L in 2019 is 1.3x that of 2015. With a stable EBITDA percentage, Personal Luxury Goods showed positive growth in the pre-Covid scenario (+5.7% CAGR 2015-19). On the other hand, there was a slight decline in profitability in other luxury sectors (+4.1% CAGR 2015-19).

Source: Global Fashion & Luxury Private Equity and Investors Survey 2021, Deloitte report

And what about Covid’s impact by geographical area? APAC regions show the lowest result from Covid-19 in 2020, both for PLG (Personal Luxury Goods) and for Experiential luxury segments, while Europe and America show a higher mark.

Source: Global Fashion & Luxury Private Equity and Investors Survey 2021, Deloitte report

The Deloitte report also provides expected recovery by geographical area. In the experiential luxury segment, the post-Covid recovery should be faster. APAC is expected to experience a strong comeback in the PLG segment, while Europe is expected to experience a moderate recovery.

Source: Global Fashion & Luxury Private Equity and Investors Survey 2021, Deloitte report

Covid impact on PLG

Personal luxury goods face the following challenges due to Covid-19:

  • stock management,
  • cash and liquidity shortage,
  • supply chain,
  • channels and go-to-market,
  • demand and offer.

So to overcome these challenges and possible crises, the new main strategies that companies will adopt will revolve around: 

Source: Global Fashion & Luxury Private Equity and Investors Survey 2021, Deloitte report

Investors perspective

Investors expect a recovery from the Covid impact in the next three years in the next three years, particularly in sectors such as Personal Luxury Goods. In addition to Cosmetics & Fragrances and Furniture, Hotels, Restaurants & Clubs are expected to reverse last year’s negative trends. However, the cruise industry is expected to be negatively affected along with the car industry.

Source: Global Fashion & Luxury Private Equity and Investors Survey 2021, Deloitte report

Respondents generally believe that Covid-19 will be recovered by the end of 2022, at the most. Moreover, 94% of investors predict that the F&L Industry will reach pre-Covid-19 levels within 1 to 3 years, while only 6% consider full recovery to take longer.

Source: Global Fashion & Luxury Private Equity and Investors Survey 2021, Deloitte report

The F&L sectors are expected to recover at different rates: among all, Cosmetics & Fragrances (18% of responses), Apparel & Accessories (29%, including both retail and manufacturing companies), and Restaurants (16%) will recover the fastest. On the other hand, automobiles (1%), Yachts (2%), Cruises, and Private Jets (both 3%), are expected to recover at a slower pace.

Source: Global Fashion & Luxury Private Equity and Investors Survey 2021, Deloitte report

Investors interested in acquiring small-sized firms are polarized over the F&L industry. Sixty-four percent of investors (64%) predict a return of 21% to 30%, while only 9% forecast a higher return (>30%, -14.9 points from 2020).

Source: Global Fashion & Luxury Private Equity and Investors Survey 2021, Deloitte report

Technologies in Fashion & Luxury

64% of respondents will probably invest in disruptive technologies in order to benefit from potential synergies and pursue an omnichannel strategy, compared to 57% in 2020. According to respondents, the Internet of Things, Robotics, and Block Chain will significantly impact investors’ portfolios in 2021. Such technological developments will be achieved mainly through an inorganic growth strategy (M&A, 41%) and Internal R&D (35%).

Source: Global Fashion & Luxury Private Equity and Investors Survey 2021, Deloitte report

To sum up

COVID-19 impacts every industry, including the F&L. However, because of the rise of e-commerce, the sector is indeed well “prepared” as many brands no longer rely on physical sales. 

We hope this report has provided you with important information about the industry and also reliable data to take the proper steps for your business.

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