The fashion industry has fully entered the fall-winter (FW) season, which determines annual results. Major fashion corporations that struggled last year rebounded in unison this year on the back of a department store boom in the first half, but analysts say it is premature to judge that conditions have fully recovered. With a low base and sluggish domestic consumption persisting, the FW season—when sales focus on high average ticket items—is expected to be the test of whether the rebound can continue.
According to related industries on the 28th, major fashion corporations have recently launched FW new products one after another to capture fall-winter demand. From Musinsa Standard and Uniqlo, which are manufacturing and retail unified (SPA) brands, to Samsung C&T institutional sector in fashion, Kolon institutional sector in FnC, and LF Corp., they are rolling out new products by brand and ramping up marketing.
The FW season is a key period that determines fashion corporations' annual results. Summer, when clothes get lighter, the average ticket declines, and the rainy season overlaps with summer vacations, is traditionally classified as the off-season. Unlike summer, in fall and winter, sales concentrate on high-priced outerwear such as coats, padded jackets, and leather goods, which has a large impact on sales and profitability.
The fashion industry, which was sluggish last year due to a consumption downturn, has rebounded this year. Samsung C&T fashion institutional sector's second-quarter revenue rose 16.3% on-year to 593 billion won, and operating profit rose 63.6% to 54 billion won. During the same period, operating profit at Kolon FnC and Handsome surged to 15.8 billion won, up 110.7%, and 4.6 billion won, up 557.1%, respectively.
Shinsegae International's second-quarter revenue rose 15.1% on-year to 291.6 billion won, and it returned to the black with 7 billion won in operating profit. LF Corp.'s cumulative first-half revenue increased 4.7% on-year to 927.3 billion won, and operating profit rose 19% to 88.5 billion won.
A boom in department stores, the core sales channel, led to the rebound in results. Department store sales surged on rising foreign tourist numbers and premium spending, benefiting major fashion corporations. In particular, offline sales revived for traditional fashion corporations and imported fashion brands that are highly dependent on department stores.
Even so, some say it is still early to view this as a recovery across the domestic fashion sector. While each corporation has worked to improve profitability through organizational restructuring, brand streamlining, and expanding full-price sales, the base effect from last year's slump and the department store boom had a large impact on better results.
In fact, domestic fashion consumption remains weak. According to the Ministry of Trade, Industry and Resources and the Korea Federation of Textile Industries, domestic fashion purchases in the spring (March–May) totaled 24.8 trillion won, down 7.7% on-year. The fashion consumption outlook index (FCOI) for summer (June–Aug.) was also 99.5, below the baseline of 100. All major categories failed to top 100: apparel (99.7), footwear (99.5), and bags and wallets (99.1).
The fall consumption outlook is also hard to view optimistically. In the September business survey index (BSI) of 600 corporations by sales compiled by The Federation of Korean Industries, the outlook for the "textiles and apparel and leather and footwear" sector was 115.4, well above the baseline. However, the domestic demand outlook was only 100, relatively lower than exports (107.7), profitability (123.1), and investment (115.4).
With domestic demand recovering slowly, FW performance is all the more important, according to industry assessments. As the department store boom has continued since the second quarter, expectations are rising for second-half results, but sustaining the first-half rebound will hinge on how much actual demand there is for high-priced goods.
Lingering heat is a burden. If high temperatures persist, demand for fall items such as jackets and knits forms later, which can shorten the full-price selling period. For winter outerwear such as padded jackets and coats, sales also depend on when the cold starts and how severe it is. If demand does not materialize in time, it can lead to discount sales and inventory burdens, hurting profitability.
It also remains to be seen whether foreign consumer spending that fueled the department store boom will continue. With the recent decline in the won-dollar exchange rate, there are concerns that the price appeal foreign tourists enjoyed in Korea may diminish. Because foreign spending has contributed to rising department store and fashion sales, some expect exchange-rate movements to be a variable for second-half results.