The domestic stock market is experiencing a cold December, but the textile and apparel sector is heating up. Expectations for winter clothing sales, key to performance, seem to have stimulated investor sentiment. However, there are opinions that we need to watch whether apparel stocks can continue to create a different trend as concerns about sluggish consumption due to the domestic economic contraction are being raised.
According to the Korea Exchange on the 20th, the textile and apparel index has risen 2.39% this month, recording the highest increase among the sector indices in the KOSPI market. This stands in contrast to the KOSPI index, which fell 2.74% during the same period.
Among textile and apparel stocks, Youngone Corporation and F&F saw significant increases of 9.03% and 6.05%, respectively, compared to the closing price on the 2nd. Youngone Corporation distributes the outdoor brand "The North Face," while F&F distributes "Discovery." Additionally, the stock prices of Hanssem, Hanseung Industrial, Shinsegae International, and LF were also on the rise.
The rapid drop in temperature has increased demand for winter clothing, acting as a positive factor. Heavy outerwear products, such as padding and coats, are considered cash cows for clothing companies due to their high average selling price (ASP) and profit margins. Padding and coats contribute about 30% to the annual sales of major brands, highlighting their sales significance. This is also why the peak season for clothing companies is typically in the fourth quarter.
Last month, the stock prices of apparel companies experienced a correction of around 10%, which is linked to the temperatures. This year, South Korea has frequently fallen under the influence of a mobile high-pressure system, resulting in mild weather across the country until mid-last month, resembling early autumn. Concerns that outerwear consumption may decrease led to sell-offs in apparel stocks. Hyung Kwon-hun, a Research Institute analyst at SK Securities, noted, "This year, a heat wave warning was issued in mid-September, leading to an extended late summer," which he said forced corporations to delay the launch of fall and winter (F/W) products.
However, winter weather has swiftly arrived this month. Lee Hae-ni, a Research Institute analyst at YuJin Investment & Securities, said, "As temperatures drop, clothing companies' sales are expected to recover." There are also predictions in the market that the increase in gatherings and protests coinciding with the impeachment political climate following the Dec. 3 military coup will lead to higher winter clothing consumption.
The Chinese government's efforts to stimulate the domestic economy with various stimulus measures have also contributed to the rise in apparel stock prices. On the 9th, China held a Central Political Bureau meeting, implementing a "moderate easing" monetary policy for the first time in 14 years, signaling a willingness to expand liquidity and boost consumption. Park Hyun-jin, a Research Institute analyst at Shinhan Investment Corp., stated, "As China's intent to stimulate its economy is confirmed, the apparel sector is positioned as a representative industry benefiting from the Chinese economy for the time being."
The issue is that, since apparel is a consumer good sensitive to economic conditions, it is uncertain whether the performance of apparel corporations can continuously improve. According to financial information provider FnGuide, securities firms have been sequentially lowering their operating profit forecasts for apparel stocks for 2025 over the past month. Yoo Jung-hyun, a Research Institute analyst at Daishin Securities, noted, "As low growth solidifies, domestic fashion corporations are facing limitations in the growth of the domestic market," adding that "overseas expansion results are essential."