The French clothing sector is slowly recovering from its worst crisis since World War II, but the outlook remains gloomy for most retailers as government austerity measures and rising inflation dampen consumer confidence.
Even the relatively upbeat French Fashion Institute, or IFM, is forecasting that clothing sales will drop by 1.5 percent in 2010 following a 3.2 percent decrease in 2009.
Jean-Marc Genis, president of the Federation of Clothing Retailers (FEH), which represents 25,000 high street stores, said it was almost impossible to make a forecast for the year as a whole, but he expected spending on apparel to stay in line with the crisis-stricken levels of 2009.
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“I don’t see any improvement because it’s not the first market that people throw themselves at,” he said.
Consumer spending, the traditional driver of the French economy, fell 1.4 percent in June after inching up 0.6 percent in May, according to the latest data from French statistics institute INSEE.
Sales of clothing and textiles fell 13 percent in June compared with the same month last year, hampered by economic concerns, volatile weather and the late start of the summer sales, which deterred purchases, the IFM said in a separate report.
Meanwhile, household confidence has been deteriorating. The consumer morale index published by INSEE slid to minus 39 points in July, down 9 points since the beginning of the year and far below the long-term average of minus 19.
Frédérique Cerisier, senior economist at BNP Paribas, said confidence has been dented by rising inflation and the prospect of sharp cutbacks in government spending amid concerns about the size of the public deficit in the wake of the Greek financial crisis.
But most of all, consumers have had to do without a series of stimulus measures implemented in 2009 at the height of the crisis. These ranged from a bonus for consumers trading in old cars for new, to income tax exemptions for medium-income households.
“What is slightly paradoxical is that in 2009, when the economic crisis was at its peak, consumers’ purchasing power rose by a non-negligible amount [1.6 percent overall], thanks to the drop in inflation and these government policies,” said Cerisier.
“This year, even though things are going a little better from an economic point of view, they are having a harder time in terms of revenue growth,” she added.
BNP Paribas sees no immediate relief for French households: It forecasts consumer spending will increase by just 1.3 percent in 2010 and by 0.8 percent in 2011.
Still, there are some glimmers of hope for the ready-to-wear sector.
The euro, which has lost more than 10 percent of its value against the dollar since the start of the year, is proving an unexpected boon to euro zone clothing exports.
François-Marie Grau, general secretary of the French Women’s Ready-to-Wear Federation, said he expected French rtw exports to rise by 3 to 4 percent in 2010 after a 5 percent drop in 2009.
“We are going to see spikes in some markets,” he added. “In the dollar zone — in particular in the U.S., where the drop in the euro will be fully felt — I think it is entirely possible we could see exports rising by 10 percent or even 15 percent this year.”
Online sales are another bright spot. Sales of women’s rtw on the Internet jumped 30.4 percent year-over-year in 2009, compared with an increase of 11.7 percent in 2008, the IFM said.
“This is proof indeed that consumers are looking for new ways to purchase,” said Grau. “We have a dynamic market with a strong demand for creative offerings and brands, and the potential to snap back relatively quickly as soon as the overall economic recovery gathers steam.”
This month, battered retailers also found some solace in the strong start to the summer sales, thanks to sunny weather, which fueled demand for seasonal items. Despite the later-than-usual start, consumers were rushing to squeeze in some bargain hunting before their summer vacations.
“Many retailers have reported a positive trend for the first two weeks of July,” said Charles Tillard-Tête, head of statistics at IFM. “The balance of opinion on sales performance is improving markedly and is turning slightly positive for the first time in two years.”
Nonetheless, Genis at FEH said he expected stores to keep a tight rein on inventory heading into fall.
“Companies are being very cautious in their management because they know full well that 2010 is not an easy year,” he said. “When you are navigating through storms and snow and rain, you drive carefully.”