Italy’s fashion industry is expected to suffer a decline in revenues of 1.8% in the first half of 2020 due to the coronavirus outbreak, according to Carlo Capasa, head of Italy’s national fashion chamber CNMI. This follows warnings from luxury jewelry maker Pandora, which stated that its business in China has come to a halt.

As the world’s largest luxury goods market, the closure of several high-end brands in China is raising concerns about the potential damage to sales if the virus is not contained quickly. Italy, known for its renowned fashion houses such as Prada, Armani, and Moncler, is the second-largest European market for fashion and luxury goods, after France. The sector contributed around 5% of Italy’s GDP with a total turnover of 90 billion euros last year.

Capasa predicts a 1.8% decline in turnover for the Italian fashion industry in the first six months of this year, primarily in the first quarter. Prior to the outbreak, expectations for 2020 were for a return to the historical annual growth rate of around 3%. However, Capasa now believes a 1% growth rate would be fortunate.

Chinese consumers have been the driving force behind the growth of the luxury goods industry, accounting for 35% of global sales last year, totaling 281 billion euros. However, the coronavirus has resulted in travel restrictions, flight cancellations, and a decrease in Chinese tourists, particularly during the New Lunar Year holiday, which is a peak retail season.

Companies around the world are expressing concerns about the effects on their supply chains and financial performance. Ralph Lauren has closed half of its 110 stores in China, while Tiffany & Co has temporarily closed several stores in affected areas.

Pandora’s CEO, Alexander Lacik, called the situation unprecedented and noted that the company’s business in China has come to a standstill. The Danish company has closed 70 out of its 240 shops in China on government orders and customer traffic in their remaining stores is nearly nonexistent.

The outbreak has also affected events in the fashion industry. Three Chinese designers had to cancel their shows at Milan’s Women’s Fashion Week, and approximately 1,000 Chinese attendees who were expected to participate are now unlikely to show up. Capasa emphasized the significance of Chinese consumers as big spenders for the industry.

Overall, the full economic impact of the coronavirus outbreak on the fashion industry cannot be accurately assessed at this stage. However, it is clear that the sector is facing significant challenges, and swift containment of the virus is crucial to minimize the damage to sales and mitigate disruption to the supply chain.

Useful links:
1. Business of Fashion
2. Vogue Business