apparel and footwear in 2015 trends developments and prospects

APPAREL AND FOOTWEAR IN 2015: TRENDS, DEVELOPMENTS AND PROSPECTS

May 2015

INTRODUCTION

GLOBAL MARKET SPOTLIGHT

REGIONAL AND COUNTRY MIX

CATEGORY HIGHLIGHTS

FUTURE OUTLOOK

Euromonitor International PASSPORT 3 APPAREL AND FOOTWEAR: TRENDS, DEVELOPMENTS AND PROSPECTS

Disclaimer

Much of the information in this

briefing is of a statistical nature and,

while every attempt has been made

to ensure accuracy and reliability,

Euromonitor International cannot be

held responsible for omissions or

errors.

Figures in tables and analyses are

calculated from unrounded data and

may not sum. Analyses found in the

briefings may not totally reflect the

companies opinions, reader discretion is advised.

The global apparel and

footwear market delivers steady

performance despite softer

growth in China and much

weaker outlook in Russia and

Brazil. Meanwhile, a sustained

recovery in Western Europe

remains elusive and improving

economies are yet to provide a

significant growth boost to

apparel and footwear sales. This

report explores most prominent

trends from a geographic point

of view as well as key drivers

within apparel category

dynamics in the current global

market.

Scope

All values expressed in this report are in US dollar terms using a fixed exchange rate (2014).

All forecast data are expressed in constant terms; inflationary effects are discounted. Conversely, all historical data are expressed in current terms; inflationary effects are taken into account, unless otherwise stated.

Global Apparel and Footwear US$1,749.5 billion

Western Europe US$420.4 billion

Eastern Europe US$111.5 billion

North America US$364.3 billion

Latin America US$152.3 billion

Asia Pacific US$585.2 billion

Australasia US$22.3 billion

Middle East and Africa US$93.5 billion

INTRODUCTION


The core objective of this report is to examine the current state of the global apparel and footwear industry and determine the future prospects within the various regions and categories.

The regional and country mix section pinpoints recent developments in key geographic markets. The analysis is informed by a number of factors, including shifts in demographic profiles, macroeconomic

aspects and the activities of multinational brands.

The category analysis section is informed by a number of factors, including shifts in disposable incomes, cultural norms, and the activities of multinational brands.

The concluding part of this report analyses the future outlook of the global apparel market in both value and volume terms, characterised by the ongoing power shift to emerging markets.

The report does not claim to be comprehensive, but rather seeks to offer high-level insight into key developments and opportunities in the apparel and footwear industry at a time of continued macroeconomic

uncertainty.

Objectives

INTRODUCTION


INTRODUCTION

Key findings

Resilient global growth

despite economic

headwinds

The global apparel and footwear market delivers another year of solid growth in 2014

despite weakness in key markets including China, Russia and Brazil and ongoing

difficulties in Western Europe.

Asia Pacific growth is

slowing but region still

remains the number one

opportunity

Despite a slowdown in the Chinese economy, Asia Pacific remains the largest regional

apparel and footwear market. International brands will continue to penetrate the regions

lower-tier cities especially in China where rising incomes will see market growth become

more widespread.

US continues solid

recovery The US has shown solid post-recession recovery and the future looks promising. Although

in 2015 China will take its leading position as the worlds largest market, performance and

the expansion in the US will remain key for all fashion brands looking for global dominance.

Outlook for Western

Europe is showing

tentative signs of

improvement

Although 2014 brought virtually no growth to the Western European apparel and footwear

market, there are signs of a pick-up and positive momentum across some of the markets

including Greece, Spain and Portugal, and 2015 is expected to be a year of fragile recovery

following seven years of weak performance.

Menswear - the new

growth area for the

fashion industry

In 2014, the menswear category increased by 4.5% compared to 3.7% for womenswear,

and by 2019 will contribute and additional US$40 billion in sales to the global apparel and

footwear market, leaving considerable capacity for category development. Mens shirts,

jeans, and jackets and coats are forecast to be the star performers.

Sportswear and comfort

dressing to inspire

innovation across all

categories

The dynamic growth of performance and sports-inspired apparel and footwear has initiated

a slow-burning but inexorable shift to comfort dressing as part of daily lifestyles. The shift is

already visible across most categories, including denim, where brands are using innovation

to drive growth and meet consumer needs.

INTRODUCTION



CATEGORY HIGHLIGHTS

FUTURE OUTLOOK


The global apparel and footwear market was valued at US$1,749.5 billion in 2014 maintaining a strong growth rate of 4.5%. The pace of growth was on a par with 2013 and marginally slower compared to 2010-

2012, as a result of ongoing challenges in Western Europe and weakness across major emerging markets:

Russia, China and Brazil.

Growth rates in Russia, which were previously projected at 10% in both 2014 and 2015, have been revised downward to 6% in 2014 and -1.2% in 2015 (local currency, current terms).

2014 proved to be a difficult year for China too as the country posted its slowest growth for over a decade. However, regardless of the slowdown, it is still predicted to overtake the US as the largest apparel and

footwear market in 2015.

Resilient performance despite economic headwinds across BRICs


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Global Apparel and Footwear Market 2009-2014

Retail value sales % y-o-y growth

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Brazil Russia India China

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BRICs: Apparel and Footwear Market Growth 2011-2014

2011-12 2012-13 2013-14


Western Europe continues to hold back global growth


% y-o-y growth 2014 Over 10% 5-10% 2-5% 1-2% 0-1% Decline

Western Europe is still dealing with

crisis legacies and remains the global

cold spot with sales continuing to fall or

post stagnant growth across a number

of key countries. That said, the outlook

for 2015 is promising with a tentative

recovery expected following seven

years of weak performance.


China to secure top spot in the global ranking in 2015


Top 10 Apparel and Footwear Markets by Retail Value 2010

vs 2015 (Current)

2010

Ranking

2010

US$ billion

2015

Ranking

2015

US$ billion

1. US 301 1. China 351

2. China 221 2. US 338

3. Japan 82 3. Germany 87

4. Germany 82 4. Japan 84

5. UK 73 5. UK 82

6. Italy 65 6. Russia 68

7. France 55 7. India 63

8. Russia 46 8. Brazil 57

9. Brazil 41 9. France 54

10. Spain 35 10. Italy 51

Despite the current slowdown in GDP growth, China has weathered the global

economic and financial crisis over 2010-

2015 better than virtually any country and

the apparel and footwear market is well

placed to enjoy further growth over the

next five years.

In fact, the country is on track to overtake the US as the world's largest apparel and

footwear market in 2015.

Unsurprisingly Western European countries: Italy, France and Spain

experienced the largest fall in the top 10

ranking.

2015 is expected to be particularly unfavourable for Italy with only 0.5%

projected real GDP growth, the lowest out

of all Eurozone economies.

As a result, many fashion brands may consider the Italian market as a liability as

price competition is expected to become

even more intense.


Since the strong post-recession rebound in apparel and footwear sales, global progress in value terms has been steady led by consumers trading up from unbranded to more premium branded products in emerging

markets and the phenomena of affordable luxury in developed countries.

The pace of growth in volume sales has been much slower than value as consumer confidence remained low across many markets placing restrictions on non-essential household spending, including apparel and

footwear. Some of the highest volume declines were recorded in Ukraine, Italy and Japan.

Sharper decline in global volume growth


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2009-10 2010-11 2011-12 2012-13 2013-14

% y

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Global Apparel and Footwear Value vs Volume Sales Growth 2009-2014

World % value growth World % volume growth

INTRODUCTION



CATEGORY HIGHLIGHTS

FUTURE OUTLOOK


Asia Pacific remained the world's largest regional apparel and footwear market in 2014 with faster growth further widening the gap over Western Europe and North America. Sales in the region were valued at US$585.2 billion in 2014, delivering just over 33% of the world's total. However, Asia Pacific along with Eastern Europe were characterised by a slowing or stagnant pace of growth in 2014 as ongoing currency weakness, political unrest and slower economic growth combined resulted in higher uncertainty among consumers.

The most dynamic regions in 2014 were Latin America and the Middle East and Africa each growing by 10%. While Brazil remains a main player in Latin America, it was growth of over 30% in Argentina and Venezuela that set this region apart. However, much of this value growth is inflationary and constant value growth as well as volume growth presents a more modest picture.

The Middle East and Africa, dubbed fashions final frontier was primarily driven by dynamic increases in Saudi Arabia, the United Arab Emirates and South Africa, which are lucrative markets under consideration by mass and luxury fashion brands alike.

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Asia Pacific Western Europe North America Latin America Eastern Europe Middle East andAfrica

Australasia

% y

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gro

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US

$ b

illio

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fixe

d e

xch

an

ge

ra

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Apparel and Footwear Value Sales 2014 and Growth 2013-2014 by Region

2014 2014 % growth

Stuttering growth in emerging markets



Asia Pacific, as the leading region for apparel and footwear performance, while fundamentally shaped by China, is also strengthened by a number of other dynamic markets. Aside from India in 2014, double-digit growth was also seen in two other countries namely Vietnam and Indonesia.

While the outlook for China is unfavourable, Indias growth is going from strength to strength. In 2014, it reached 15% in current terms and double-digit growth rates are also expected over the forecast period.

Therefore, it comes as no surprise that India has become a key next step in global expansion strategy for major fashion brands. 2015 has been rumoured to see the entrance of two fashion heavyweights: Gap, which in partnership with Arvind is planning to open 40 stores throughout 2015 and H&M, which announced first store openings in the second half of the year.

Despite a number of strong performances the region does have a few weaker players where economic factors and the more developed nature of the market have made growth difficult to come by. Japan, Taiwan and South Korea all struggled to find significant value growth in 2014 as low-priced fashion brands continued to gain market share.

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25

China India Indonesia HongKong,China

Japan SouthKorea

Philippines Malaysia Thailand Vietnam Taiwan Singapore

% y

-o-y

gro

wth

Ab

so

lute

va

lue

gro

wth

(U

S$

b

illio

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20

13

/20

14

Asia Pacific: Apparel and Footwear Growth by Country 2013-2014

Absolute value growth (US$ billion) 2013/14 % y-o-y growth 2013-14

Beyond Chinas shadow, India leads double-digit growth REGIONAL AND COUNTRY MIX


Chinas contribution to Asia Pacifics apparel and footwear value sales rose from 50% in 2009 to 55% in 2014, highlighting the extent to which regional performance hinges on this single US$324.6 billion market.

China has now seen its growth rate slacken over two consecutive years down to 7.9% in 2014, which is the

countrys slowest growth for over a decade. Although slower, this is still an admirable growth rate from a

Western perspective and China is still predicted to continue leading the future global growth contributing

over US$150 billion in additional sales by 2019.

Therefore, slowing growth is not a matter of concern as such, the real challenges lie elsewhere. As consumers in China are getting accustomed to the realities of a slowing economy, they have also become

increasingly price-sensitive while simultaneously developing more sophisticated habits and being more

demanding in terms of quality and style. Alongside shifting consumer habits, including the exponential

growth of online retailing, the focus of fashion retailers now turns to preparing for long-term growth,

following the initial rapid rate of investment.

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China: Apparel and Footwear Sales vs Y-o-Y Growth 2009-2014

China Rest of Asia Pacific China % Y-o-Y Growth

Chinas slowdown deepens but growth is still substantial REGIONAL AND COUNTRY MIX


2014 proved to be a challenging year for Hong Kong, which has the worlds third highest per capita sales of

apparel and footwear.

A number of fashion and luxury brands blamed external pressures, notably Hong Kongs civil unrest,

for its poor performance.

The Hong Kong protests started in the second half of 2014, but the apparel and footwear market had been

showing signs of slowing down much earlier in the

year. In April 2014, for example, Hong Kongs overall

retail sales were down almost 10% on the same month

a year earlier, their steepest decline in five years.

The civil unrest undeniably stemmed the flow of Chinese visitors crossing over from the mainland. This

is important because Chinese tourists account for

more than one third of Hong Kongs total retail sales.

At the same time, retail rents remain extortionately high with Hong Kong ranked as the world's most

expensive retail location, after overtaking New York's

Fifth Avenue in 2012, which results in deflationary

pressure on margins.

Hong Kong issues pose threat to sustained future growth


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Hong Kong,China

Japan Singapore South Korea Taiwan

US

$ p

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ca

pita

Asia Pacific: Top Five Highest per Capita Apparel and Footwear Markets 2014

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Hong Kong, China: Apparel and Footwear Sales vs Growth 2009-2014

Value size % y-o-y growth


A booming middle class, rapid urbanisation and an appetite for Western brands from its predominantly

young consumers, have all made Indias rapidly

growing US$55.5 billion apparel and footwear

market an attractive prospect for overseas brands.

With its complex regulatory and bureaucratic environment now loosened following the FDI reform

policy passed in September 2012 more dynamic

international activity was expected.

However, 2014 brought rupee exchange rate volatility creating an additional challenge to entering

this low per capita spending market and a number

of brands that had expressed interest were

understood to be deferring their first store

openings.

Indeed, the opportunity remains a difficult one to capitalise on with per capita spending still very low

by global standards. Many recently-opened

shopping malls are struggling as rents in Mumbai

are some of the highest globally. Furthermore

expansion in India requires retailers to source 30%

of their supplies locally, which is proving a barrier.

Both Gap and H&M announced plans to enter India in 2015. Gap will work on Indian franchise-

based expansion in partnership with Arvind

Lifestyle Brand Ltd and H&M is rumoured to open

its first stores in the second half of 2015.

India shows huge potential but is still underdeveloped


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India: Apparel and Footwear per Capita Spend 2009-2014


45

55

65

2009 2010 2011 2012 2013 2014

Rs p

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$

Rs Exchange Rates Against US$ 2009-2014

US$


Although the share of sales via the internet remained relatively low at 3.5% in 2014, the pace of growth has been

considerable with a 70% CAGR over 2009-2014.

To a large extent, the growth was fuelled by ballooning smartphone penetration and the number of internet users,

which in 2014 accounted for 193 million people, second only

to China and the US.

2014 was the year of acquisition of Myntra by Flipkart. Both companies entered internet retailing in India in 2007 and were

pivotal in changing consumer perceptions of the channel. The

acquisition aimed at improved distribution and integration in

the internet retailing space in order to compete with global

players including Amazon, which launched in India in 2013.

In April 2015, Flipkart announced plans to shut down its website within a year and transition completely to a mobile

app which further highlights the rapid diffusion and adoption

of m-commerce among Indian consumers.

A significant number of fashion brands are available to purchase online from multibrand e-commerce players

(Myntra, Jabong) in India despite the lack of store-based

presence. It is an effective way to generate brand awareness

prior to further expansion in the country.

The explosion of mobile phone use and the m-commerce revolution


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India: Growth in Internet Apparel and Footwear Retailing 2009-2014

0 200 400 600 800

Million users

Number of Internet Users: Top Five Markets Globally 2014

China US India Japan Brazil


The Japanese apparel and footwear market has struggled over 2009-2014 showing pronounced decline in both volume and value terms; however, recently the country has shown some signs of improvement.

Following years of decline, the country saw minor 0.5% and 0.8% growth in 2013 and 2014, respectively, assisted by the governments monetary and fiscal stimulus which temporarily revived consumer confidence.

In April 2014, VAT increased for the first time in 17 years from 5% to 8%, which had a crippling effect on consumer spending despite the fact that a number of fashion brands including H&M decided not to pass

this increase onto customers.

The previously announced further VAT rise to 10% planned for October 2015 has been postponed by 18 months, which is likely to support a fragile recovery in spending power.

Success has been found in this difficult market with Gap accelerating the expansion of its Old Navy brand in Japan. Opening its first store in 2012 it had already expanded to 42 stores by April 2015. With value

being key, Japanese consumers are responding well to this affordable fashion concept.

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Japan: Apparel and Footwear Sales vs Growth 2009-2014


Japans modest improvement under threat REGIONAL AND COUNTRY MIX


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% y

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Market size 2014 (US$ billion)

Eastern Europe: Market Size vs Y-o-Y Growth 2014

Ukraine

Russia

Hungary

Poland

Romania

Czech Republic

Over 2010-2013, Eastern Europe was one of the worlds most attractive regions for apparel

and footwear sales, registering a CAGR of

over 9%.

Growth came primarily from Russia, delivering some 77% of absolute value

growth, with Ukraine being the second notable

contributor with a 11% share of growth.

Following recent political turmoil, the future success of the region is in jeopardy as

tensions between Russia and Ukraine

threaten to derail the economic progress

made to date.

Following a few years of decline, sales in Hungary have now started to recover and the

country saw double-digit growth in 2014.

Similarly growth in Romania is picking up with major fashion players recording impressive

results in 2014. Notably, Decathlon sales

were up by 30%, H&M sales by 38% and

Inditex has also experienced double-digit

growth rates amid recent new store openings.

Eastern Europe growth threatened by Russia and Ukraine tensions



Growth rates in Russia, which were previously projected at 10% in both 2014 and 2015, have been

revised downward to 6% in 2014 and -1.2% in 2015

(local currency, current terms).

In constant terms, the total apparel and footwear market is expected to see an even sharper 7% decline.

The mounting political and economic crisis, combined with the roubles turbulence is proving to be one of the

industrys toughest challenges to date, particularly for

companies that have fairly significant exposure to

Russia such as adidas or Inditex.

Currently, most fashion brands are adopting a wait-and-see approach to further expansion. That said, the

more audacious players (Gucci, SuperGroup) are

taking the risk of opening new stores in the middle of

Russias most severe financial crisis since 1998, betting

that these investments will yield long-term returns.

In addition, sharp devaluation of the rouble in 2014 has prompted a number of consumer goods brands to

increase prices, adding further pressure to consumers

cautious approach to spending. 30

35

40

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Q1 2014 Q2 2014 Q3 2014 Q4 2014

RU

B v

s U

S$

RUB Quarterly Exchange Rates Against US$ 2014

Russia expected to post decline in 2015


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2014 2015

% y

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Russia: 2014 and 2015 Growth - Previous vs Current

Previous Current


Following the Russian military intervention in Ukraine, 2015 is expected to be a difficult year for the Ukrainian apparel and

footwear market with sales set to contract by almost 9% in

current terms as political and economic uncertainty will

negatively impact on consumers spending with apparel taking

more of a back seat compared to first necessity products.

As such demand for unbranded apparel, cheap Chinese imports and second hand clothing is expected to continue to

prevail, especially in the near future.

A number of international fashion brands including River Island, Esprit, New Look and Lee Cooper left the market towards the

end of the review period.

Meanwhile, new entrants notably Intimissimi, Sinsay and Keddo are proceeding cautiously in uncertain economic conditions.

H&M had also been set to join the Ukrainian market in 2014, however those plans were postponed, most likely until later in

2015.

2014 also brought an increased level of patriotism following Russias annexation of Crimea and the war in eastern Ukraine

spurred renewed interest in apparel with national symbolism. As

such, ethnic clothes, such as blouses with embroidery, enjoyed

a surge in demand.

Ukraine will be slow to recover


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Ukraine: Apparel and Footwear Sales vs Growth 2009-2014



Western Europe shows only little change in direction for now


Apparel and footwear in Western Europe showed virtually no growth in 2014 echoing its 2013 performance at US$420.4 billion. This flat performance masks a reasonably wide variation in growth.

Greece and Spain have finally returned to positive growth following five years of consistent negative performance. However, conditions continue to remain difficult in Italy, where the apparel and footwear market is expected to contract by US$8.9 billion by 2019, dragging down the regions overall future growth trajectory.

France and the Netherlands also contracted in 2014 as consumers are becoming more accustomed to significant discounts and frequent promotions. Economising attitudes and the ongoing democratisation of information over price incentives via the internet were the main drivers of this trend.

The two largest Western European markets, Germany and the UK, both showed modest growth of 1% in 2014 reflecting continued consumer caution and price sensitivity.

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Western Europe: Market Size vs Growth by Country 2014

Market size 2014 % growth 2013 % growth 2014


After a difficult recessionary period, the US market is looking relatively healthy with growth in 2014 outpacing all Western European markets, with the exception of Turkey.

This was no dramatic spending boom as consumers continued to spend cautiously and shop around; according to industry sources over 30% of consumers use smartphones to compare apparel prices.

Consumers took advantage of a consistent sales environment especially over the holiday season. This approach had a negative impact on value growth which decreased in 2014 compared to the previous year.

Key beneficiaries were bargain shopping stores, fast fashion brands and inevitably online options where price comparison is readily facilitated. A number of apparel companies are catering to consumers desire for low prices by expanding their selection of outlet stores. Nordstrom, for example, announced that its off-price stores will become key to company strategy.

The price-sensitive US environment appears to be the perfect match for the UK retailer Primark, which is planning to enter the market in 2015. The winning combination of rock-bottom prices, on-trend product and attractive store designs is likely to add to the already extremely competitive apparel retail environment, particularly in the teen fashion segment.

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US: Volume, Value and Unit Price Growth

2009-2014

Volume Value

A cautionary tale as bargain-hunting US consumers drive market



Primark is not the only overseas brand betting on the US market. A large number of foreign retailers continue to look to the US

partly in response to challenging growth in other parts of the

developed world especially Western Europe.

H&Ms expansion has been particularly dynamic as its sales posted a CAGR of 18% over 2009-2014. The brand was also one

of the largest value contributors to overall apparel and footwear

growth delivering US$1.1 billion additional sales over 2009-2014.

Building on this success, in October 2014 H&M opened the first US stores of its two sister brands - the more upscale offshoot &

Other Stories as well as COS, well known for its sharp,

minimalistic chic.

Fast Retailings Uniqlo brand, although with much lower presence compared to H&M, is currently undergoing the next stage of its

US expansion, which will see it open new stores on the east and

west coasts and in the central region.

The retailer has announced bold plans to own 200 stores by 2020, part of its broader push to become the world's top fashion

retailer. Fast Retailing also made a large acquisition at the end of

2012, acquiring US operator J Brand - the market leader in

womens super premium denim. 0

500

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H&M Zara UniqloU

S$ m

illio

n

US: Growth of Selected Overseas Retail Brands

2009/2014

2009 2014

US growth spurs expansion of overseas players



Latin America was home to the worlds two fastest- growing apparel and footwear markets in 2014 - Venezuela and Argentina. The extent of value growth has been exaggerated by excessive inflationary pressures, indeed Venezuela saw negative volume growth over the review period. A lack of foreign currency and import difficulties in Venezuela have distorted supply and unit prices causing them to rise sharply.

Brazil meanwhile, the largest apparel and footwear market in Latin America, is enduring its own struggles too, as growth plummeted to below 3% in 2014 and stagnant growth is expected over the forecast period.

Although recent years have seen a string of international brands entering the market - Topshop, Gap and Forever 21 to name a few - the operating environment remains highly challenging with little prospects for more dynamic growth until Brazil reduces the costs of doing business and improves infrastructure.

In the short term, the outlook for 2015 remains bleak as upcoming tax increases and interest rate hikes will weigh further on already weak consumer confidence resulting in negative growth in constant terms.

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Latin America: Market Size vs Growth vs Inflation by Country 2014

Market size 2014 % y-o-y growth 2014 % Inflation rate 2014

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Latin America: Volume and Value Growth 2009-2014

Volume Value

Inflation and economic woes distort Latin American growth success



Regardless of the challenges, Latin Americas growing apparel and footwear market is still an attractive

proposition to international brands faced with slow

growth in developed markets. It has been protected by

multiple measures aimed at fostering domestic rather

than overseas development, however high import tariffs

(in relation to Asian imports) and high operating costs

have not dissuaded multiple entrants.

The brands continue to arrive; in 2013, H&M Hennes & Mauritz and US company Forever 21 arrived in Chile

joining long-established brands such as Inditexs Zara

and Gap. Forever 21 opened a second store in Chile in

2014. Zara has been well established for some time and

is now the market leader in both Venezuela and Mexico.

In Venezuela, import restrictions are hampering domestic manufacturers too. As domestic capacity is

lost this is setting the scene for more potential overseas

entrants when the climate becomes more favourable.

The arrival of overseas brands with their well-funded advertising campaigns does undoubtedly harm

domestic retailers although it does result in price

competition that benefits the consumer.

Inditex: Zara Store Numbers in Latin America

2014

Country Store

numbers

Apparel and footwear

brand share

Argentina 10 0.5%

Chile 9 1.2%

Colombia 11 1.4%

Brazil 39 0.6%

Mexico 59 1.6%

Venezuela 10 2.2%

Import barriers make Latin America tough but possible to crack


International Brands Present in Latin America


With 80 million people claiming to be actively engaged in one or more sports, and approximately 60% of the

population being under 30 years old, sportswear in

Brazil is potentially a lucrative market.

In fact, sportswear was the only category in Brazil to achieve double-digit growth in 2014 with better

performance compared to 2013 with a major boost

provided by sales associated with the FIFA 2014 World

Cup, despite the initial negative attention in the run-up

to the event.

According to FIFA, Brazil has the fifth highest population of football players of the world, which

reached 13.2 million in 2013.

As such, it is a key strategic market for two largest global sportswear players: adidas (the official World

Cup sponsor) and Nike. In the case of Nike, Brazil is

already the companys fourth largest market globally,

behind the US, China and Japan.

Brazils sportswear market is also set to feel the benefit of hosting another high-profile sporting event - the

Summer Olympics in 2016 - as purchasing is expected

to rise from both domestic as well as overseas visitors.

0

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Nike Inc adidas Group

% y

-o-y

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$ b

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Brazil: Nike vs adidas Value Sales and Growth 2014

Value sales 2014 % y-o-y growth 2014

0

5

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25

2009-10 2010-11 2011-12 2012-13 2013-14

% y

-o-y

gro

wth

Brazil: Growth in Apparel and Footwear vs Sportswear 2009-2014

Apparel and Footwear Sportswear

Hosting the 2014 World Cup lifts sportswear sales



The Middle East and Africa region was the fastest growing region for apparel and footwear

in 2014, on a par with Latin America. However,

given Latin Americas distorting inflation rates,

in constant terms the Middle East and Africa

experienced much more dynamic growth.

United Arab Emirates, Saudi Arabia and South Africa lead the region in terms of value sales.

The youthful demographic in the region is a key driver for both young fashion as well as

childrenswear. Strong population growth in

Saudi Arabia in particular (12% over 2009-

2014) is ensuring a growing market.

An increasing number of women entering the workforce is also influencing market

performance and sales of womenswear in

particular. In Saudi Arabia for example, the

employed female population rose by 6% to

reach 1.4 million in 2014.

In terms of modern retail expansion plans, Abu Dhabi (United Arab Emirates) leads the way

after following a period of undersupply.

The recent opening of Yas Mall signalled the start of the transformation of the retail market in Abu Dhabi, which

aims to compete with Dubai. In 2014, Dubai opened The

Beach, a new shopping and lifestyle destination and

started development of a new megamall, Mall of Arabia.

New retail developments will not only increase local spending but also attract tourists. Numbers of Chinese

tourists, who recently discovered the United Arab Emirates

as a shopping destination, are expected to soar, positively

impacting the luxury end of the shopping marketplace.

Middle East and Africa: Modern shopping centres boost growth


-4

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UnitedArab

Emirates

SaudiArabia

SouthAfrica

Israel Egypt Morocco

% y

-o-y

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tail

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US

$ b

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Middle East and Africa: Market Size vs Growth 2014

Market size 2014 % y-o-y growth 2014


The Middle East and Africa regions strong growth over the review period saw South Africa playing a pivotal role. It grew on a par with Saudi Arabia and the United Arab Emirates, delivering 13% of the regions value growth in 2014.

In the last three years South Africa has attracted a slew of international brands including Australian retailer Cotton On, Gap, Topshop, Forever 21 and Zara. H&M is expected to follow shortly, with its first store in Johannesburg set to open in 2015.

Many of the new entrants are not only targeting South Africas growing middle class but also see it as a springboard to pan-African expansion. That said, potentially the shortage of prime location spots in key malls is likely to put a ceiling on ambitious expansion plans.

Mall of Africa is one of the hotly anticipated shopping destinations due to open in 2016. It is reported to be South Africas biggest single-phase mall development, and one year ahead of the opening some 83% of total area has already been let, with major tenants including Zara, Gap, Forever New, River Island, Mango, Lipsy London, Tommy Hilfiger and Express US.

Meanwhile, local brands, including the Foschini Group, Truworths and Edcon, which still hold the majority of South Africas apparel and footwear market share, are streamlining their sourcing and improving speed-to-market efficiency in order to keep the competition at bay.

South Africa: Sub-Saharan Africas main shopping destination REGIONAL AND COUNTRY MIX

0

5

10

15

EdconHoldings Ltd

Mr PriceGroup Ltd

PepkorHoldings Ltd

TruworthsGroup Pty Ltd

WoolworthsHoldings Ltd

(South Africa)

adidas Group FoschiniGroup Ltd,

The

Nike Inc Pick 'n' PayStores Ltd

JordanFootwear

Bill

ion

un

its

South Africa: Top 10 Apparel and Footwear Players 2014

% market share 2014


Australia: Western brands lead to a climate of lower spending


The recovery trend in the Australian economy, with growing GDP, declining interest rates and low levels of unemployment, is having a positive impact on the apparel and footwear spending. With 2014 growth

reaching 2.7%, Australia has outperformed most developed markets and continues to present a lucrative

opportunity for fashion players.

Australias main allure lies in its ready-made Western culture and attitudes towards dressing, and a business-friendly environment. The country also benefits from being close to the dynamic Asia Pacific

region, making it even more attractive to international brands that are set to benefit not only from domestic

demand but also from a healthy flow of Asian tourists, particularly from China, who can take advantage of

lower prices of major fashion and luxury brands compared to the Chinese market.

-2%

-1%

0%

1%

2%

3%

17

18

19

20

2009 2010 2011 2012 2013 2014

US

$ b

illio

n

Australia: Apparel and Footwear Sales and Growth vs Western Europe and the

US 2009-2014

Australia value size

Australia % y-o-y growth

Western Europe % y-o-y growth

Y-o

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row

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2009 2010 2011 2012 2013 2014

00

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Australia: Arrivals from Inland China 2009-2014

Number of trips

INTRODUCTION



CATEGORY HIGHLIGHTS

FUTURE OUTLOOK


Womenswear remains the cornerstone of the apparel and footwear industry, with global retail

sales reaching US$662.1 billion in 2014 compared

to menswears US$439.9 billion. However,

menswear grew faster than womenswear for the

second consecutive year, reflecting a big sales

leap in both emerging and developed markets.

Growth in menswear is fuelled by two main factors: greater focus on personal appearance combined

with large disposable incomes. Globally, mens

annual disposable income is still 50% higher than

womens.

The trend is particularly prominent in the US where menswear continued to push ahead of the overall

industry growth with 2.4% in 2014 compared with

only 0.6% for womenswear, as American men

have continued to embrace fashion as a way to

present themselves to the world.

This has been mainly driven by millennial consumers who are more willing to experiment with

different clothing styles and brands in order to find

their own personal style.

Male consumers are also increasingly turning to the internet for fashion advice including a wide

variety of fashion blogs and forums detailing trends

with mens fashion in mind. Many men who would

normally have nowhere to start used these various

platforms as jumping-off points that piqued their

interest in fashion.

Similarly in emerging markets, menswear continues on an upward growth trajectory. In India,

for example, spending on menswear climbed 14%

in contrast to 11% for womenswear.

Fashion-conscious males present huge opportunity for menswear

CATEGORY HIGHLIGHTS

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Womenswear Menswear

% y

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Global Womenswear vs Menswear Sales and % Y-o-Y Growth 2014

Market size 2014 % y-o-y growth 2014


Higher unit prices translate into great potential in luxury menswear

CATEGORY HIGHLIGHTS

0

50

100

150

200

250

World US Western Europe

US

$

Mens vs Womens Suits: Average Unit Price in Selected Markets 2014

Men's suits Women's suits

The average cost of menswear purchases for certain categories is generally higher than in womenswear, as

men are more inclined to purchase brands they know and

trust. Men are also less frequent buyers than women and

the trend for disposable fashion is less pronounced in

menswear compared to womenswear.

Additionally, the rapid rise of male purchasing power in emerging markets, coupled with an increasingly

aspiration-fuelled consumption culture, is an obvious

opportunity for more stereotypical male luxury categories,

such as fine wines, spirits, luxury electronic gadgets or

watches. However, the newest and arguably most

untapped opportunity is in mens fashion and

accessories. As such, luxury menswear has an enormous

capacity for further category development.

To address this trend, In the past few years, an increasing number of female-focused brands have been

launching standalone stores for their menswear offerings,

while department stores have been revamping their

menswear areas. July 2015 will also see an introduction

of New Yorks first menswear-specific fashion week,

following the London: Collections Men event first

introduced back in 2012.

0

2

4

6

8

2009-10 2010-11 2011-12 2012-13 2013-14

% y

-o-y

gro

wth

Menswear vs Designer Menswear: Global Growth 2009-2014

Menswear Designer menswear


Solid global performance of apparel and footwear overall would have been decidedly weaker had it not been for the sportswear category. Surging consumer interest in health and fitness participation, coupled with a big increase in the number of brands merging sportswear with fashion, pushed up sportswears global retail value by 7% in 2014, the categorys strongest performance in seven years.

Most big-name fast fashion retailers now offer a wide range of sports-inspired apparel and footwear, and sportswear brands themselves have upped their fashion credentials.

Performance sportswear is also pulling further ahead of fashion-inspired sportswear in terms of market value. Millennials, in particular, have realised that running and other sports activities are good ways to lose weight and get fit. Leading sports brands have thus responded with a wide range of technically sophisticated and innovative products.

The US is the spiritual home of sportswear, both for performance and sports-inspired categories, and is by far the biggest sportswear consumer in the world. Sales in 2014 increased by 8%, compared with just 5% in China, the second biggest market, which suggests a significant shift in geographical consumption power from East to West.

Sportswear continues on path of dynamic growth

CATEGORY HIGHLIGHTS

0%

2%

4%

6%

8%

0

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100

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200

250

300

2009 2010 2011 2012 2013 2014

% y

-o-y

gro

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US

$ b

illio

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Sportswear Sales and Growth vs Apparel and Footwear Growth 2009-2014

Sportswear value size Sportswear % y-o-y growth Apparel and footwear % y-o-y growth


Jeans generated slower global growth in 2014 than in any of the preceding five years. This is a

direct result of the growing popularity of sports-

inspired fashion, also called athleisure, where

women are opting for comfortable yoga-wear or

sports-inspired apparel instead of jeans to wear on

a daily basis.

It poses big strategic challenges for the leading denim brands. VF Corp has even created a

special think-tank to help it come up with ways to

turn things around, and Levi Strauss had to cut

around 800 jobs in 2014 as profits plunged.

Although 2015 is expected to bring a revival in denim sales, mainly due to jeans featuring heavily

in S/S 15 catwalk collections of major fashion

houses including Burberry, Gucci and Stella

McCartney, it is crucial brands understand the

impact of athleisure and continue to innovate. For

example, functional denim incorporating fibres

such as Tencel allows brands and manufacturers

to align with the trend towards comfort by creating

jeans that are more soft and elastic compared to

standard products.

Athleisure trend inspires innovation in denim

CATEGORY HIGHLIGHTS

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

0

20

40

60

80

100

120

2009 2010 2011 2012 2013 2014

Y-o

-y g

row

th

US

$ b

illio

n

Jeans Sales and Growth vs Sportswear Growth 2009-2014

Jeans value size Jeans % y-o-y growth

Sportswear % y-o-y growth


Despite the fact that the population of children aged 0-14 years contracted in 2014 in a number of key markets, including China and Brazil, the childrenswear category has performed strongly and on a global level outperformed the overall apparel and footwear growth.

In fact, in absolute terms, China was the second strongest growing childrenswear market in the world in 2014, after India (where the demographics are much more favourable). Brazil also ranked in the top five growth markets in 2014, in absolute terms.

Western Europe proved to be the weakest performer in terms of childrenswear growth, negatively affected not only by declining birth rates but also by a permanent shift in post-recession shopping patterns. Parents are now exerting higher levels of thriftiness and frugality, and more often opt for second-hand, rental and exchanged childrenswear given that such items become quickly redundant as children continually grow in size.

That said, overall, the category is gradually evolving from a comfort dressing approach to a more fashion forward proposition, driven by major fashion brands focusing on expanding their offer in the childrenswear category as well as the impact of celebrity babies, social media and childrenswear-focused fashion blogs. The arrival of the second Royal Baby in the UK in May 2015 is also expected to provide a boost to growth.

-1%

0%

1%

2%

3%

4%

5%

6%

7%

0

20

40

60

80

100

120

140

160

180

2009 2010 2011 2012 2013 2014

Y-o

-y g

row

th

US

$ b

illio

n

Childrenswear Sales and Growth vs Apparel and

Footwear Growth 2009-2014

Childrenswear value size

Childrenswear % y-o-y growth

Apparel and footwear % y-o-y growth

Childrenswear: Building apparels future growth CATEGORY HIGHLIGHTS

INTRODUCTION



CATEGORY HIGHLIGHTS

FUTURE OUTLOOK


0

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90

2014 2019

Bill

ion

un

its

Regional Breakdown of Apparel and Footwear Volume Sales 2014/2019

Asia Pacific North America Western Europe Rest of World

Led by China, Asia Pacific will extend its lead

FUTURE OUTLOOK

In terms of regional performance, Asia Pacific will extend its lead remaining the worlds largest regional apparel and footwear market in 2019. The region will see apparel and footwear sales grow by US$120.2

billion over 2014-2019 at constant prices.

Western Europe is forecast to remain largely static in terms of both volume and value sales. However, it will remain a significant market as well as retaining its strategically important pre-eminent position for fashion

design and style.

The rest of the world will become more significant too, led by emerging markets, primarily in Latin America but also with notable value growth in the Middle East and Africa.

Volume sales are however dominated by Asia Pacific with the region generating 80% of future volume growth.

0

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800

2014 2019US

$ b

illio

n r

sp

(co

nsta

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01

4 p

rice

s)

Regional Breakdown of Apparel and Footwear Value Sales 2014/2019

Asia Pacific North America Western Europe Rest of World


The Middle East and Africa is forecast to be the most dynamic region for apparel and footwear over 2014-

2019 with sales reaching US$115.8 billion by 2019.

There has been speculation about Africa being the next Asia for the fashion industry, both in terms of

the consumer base as well as product sourcing.

Indeed, dynamically growing awareness of global fashion brands among African consumers, driven by

exposure to international media and particularly

accelerated growth in internet and mobile phone

penetration, combined with rising disposable incomes

should place Africa at the top of the list for any brand

keen to harness the long-term potential of the market.

With its modern and opulent shopping malls the Middle East is a standalone growth story and is often

considered an ultimate shopping destination and a

favourable environment for the luxury segment of the

market. The United Arab Emirates and Saudi Arabia

are expected to contribute a combined US$10.2

billion to global apparel and footwear sales by 2019,

just short of the US$13.7 billion expected to be

generated by the US.

Middle East and Africa to provide fashions long-term growth FUTURE OUTLOOK

0.0

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6.0

7.0

0

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2

3

4

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6

UnitedArab

Emirates

SaudiArabia

SouthAfrica

Morocco Israel Egypt

% C

AG

R 2

01

4-2

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9

Ab

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(U

S$

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) 2

01

4/2

01

9

Middle East and Africa: Forecast Growth by Country 2014-2019

Absolute value growth (US$ billion) 2014/2019

% CAGR 2014-19


Although the position of the BRICs considerably weakened in 2014 and operating environments will remain challenging in the

short term (particularly in Russia and Brazil), BRICs will remain

key strategic markets for fashion brands over the long term.

Despite the slowdown, China alone is expected to contribute 48% of global growth by 2019, with India the second largest contributor

at 11%.

However, there is also a group of smaller emerging markets that will provide much-needed dynamism to global growth over the

forecast period.

Some of the countries to enter the limelight are Mexico and Romania, with forecast CAGRs expected to reach 4.7% and 6.2%,

respectively.

Historically, Mexico has been overshadowed by Brazil, however with the high costs of doing business in Brazil, Mexico is providing

better scope for profitability, especially given its huge population of

120 million potential consumers.

Romania on the other hand is expected to benefit from the tense situation caused by the Russia-Ukraine conflict as businesses look

for growth alternatives within Eastern Europe. This is highlighted

by the fact that the economy in Romania grew 2.8% in the fourth

quarter of 2014 boosting consumer confidence.

Twilight of the BRICs and the next fashion hotspots

FUTURE OUTLOOK

0 2 4 6 8

% CAGR 2014-2019

Forecasts for Selected Emerging Markets: % CAGR

2014-2019

United Arab Emirates Romania

India Saudi Arabia

China Mexico

Hungary


Sportswear will continue on its upwards growth trajectory, with sales from this category increasing by almost 15% over 2014-2019.

Perhaps most significantly sales of sportswear in North America and Western Europe will show strong period growth of 12% and 8%, respectively, which are impressive rates for developed markets and particularly Western Europe which will struggle to find growth within other apparel and footwear categories.

One of sportswears main growth drivers, sports-inspired apparel or the so-called athleisure trend, is now becoming part of everyday lifestyles rather than just a passing trend and comfort dressing is expected to lead sales across major categories of both womenswear and menswear in the long term.

There is also speculation that sportswear could be the next big thing in wearables, with everything from MP3 players to smart phones being sewn into garments, and with fitness devices embedded in footwear.

This fusion of technology with clothing (which is already taking place) could boost sportswears participation even further. It appears clear, however, that sportswear has picked up some powerful momentum, and it is likely to be a growing threat to mainstream footwear and outerwear.

Sportswear and comfort dressing to lead category growth

FUTURE OUTLOOK

0

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25

30

0

2

4

6

8

10

12

14

16

AsiaPacific

NorthAmerica

WesternEurope

LatinAmerica

MiddleEastand

Africa

EasternEurope

Austra-lasia

% g

row

th 2

01

4-2

01

9

Ab

so

lute

va

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(U

S$

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) 2

01

4/2

01

9

Sportswear: Forecast Growth by Region 2014-2019

Absolute value growth (US$ billion) 2014/2019

% growth 2014-19


Apparel and Footwear: This is the aggregation of womenswear, menswear, childrenswear, apparel accessories, hosiery and footwear. This dataset covers retail sales of apparel and footwear through both

store-based retailers and non-store retailers. Excludes black market sales (ie untaxed, generated within

informal retailing) and duty-free sales (travel retail). Items must be new when sold to the consumer; second-

hand/used items are excluded. Antique and/or vintage apparel and footwear is also excluded.

Womenswear and Menswear: This is the aggregation of womens/mens outerwear and women's/men's underwear, nightwear and swimwear. Womens/mens outerwear is defined as women's/mens apparel for

outdoor/out-of-the-house wear. Includes shorts and trousers, jeans, dresses, skirts, jackets and coats,

jumpers, suits, shirts and tops. Knitwear products are included.

Childrenswear: This is the aggregation of baby and toddler wear, girls apparel and boys apparel. Covers articles of apparel for children aged 0-14 years. Includes all types of garments: bodysuits, dresses, skirts,

jackets and coats, jumpers, leggings, shirts and blouses, shorts and trousers, jeans, skirts, suits, tops,

underwear, nightwear and swimwear. Nappies (diapers) - be they disposable or cloth - are excluded.

Footwear: This is the aggregation of childrens footwear, mens footwear and womens footwear. Includes all mens, womens and childrens outdoor and indoor shoes made of materials such as leather, fabric or

plastic.

Definitions

DEFINITIONS

FOR FURTHER INSIGHT PLEASE CONTACT Magdalena Kondej

Head of Apparel and Footwear Research

[email protected]

Twitter: @EMI_MagdalenaK


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