February 5, 2023

Hardwood Paroxysm

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Total turnover at +13.9% but production costs are increasing

The Italian footwear sector continues its post-pandemic recovery path, recording in the first nine months of 2022, compared to the same period of the previous year, a double increase in sales (+13.9% among companies in the Associates sample). This is the picture taken by the Confindustria Moda Study Center for Assocalzaturifici which also highlights the increase in exports (+ 23.7% in value and + 11.7% in volume, driven by luxury brands), which has already surpassed pre-Covid (except, however, for shoes with leather uppers, which has a quantity gap of -11% compared to 2019). Rewarding results in the community markets (+25% increase in value in France and Germany), in North America (+62%) and in the Middle East (+58.5%). So far, China has also performed well, but above all at the top of the range (+ 43% in value, + 34% in average price). The consequences of the war in Russia and Ukraine are severe (-32% in the first nine months overall, and -40% since the start of the conflict); Kazakhstan is growing among the countries of the former Soviet bloc (+33.4%).

Ciolini: “a big increase in costs”

For Giovanna Ciolini, President of Assocalzaturifici: «Despite the double increase in the turnover of the sector in 2022, with the expectation of a definitive return to pre-pandemic levels, and positive signs in most variables, the sharp increase in costs is undermining the margins of companies that have had to face, In addition to raw material price increases, the flame of unprecedented energy. There is also a significant lack of homogeneity among companies, with 2 out of 5 still having sales below pre-emergency values. The effects of the crisis are evident in the data on the demographics of companies (with 180 closings among shoe manufacturers since the beginning of the year, between industrial and craft, -4.5%), while in terms of employment levels, the recovery has already registered in the first two quarters (+2.3%, insufficient to cover losses incurred in the last two years) and the significant reduction, compared to 2021, of authorized surplus fund hours in the leather business (-81.6%, with still +80% in 2019). Uncertainty dominates the short-term outlook, in a global panorama where inflation, rising bills and geopolitical turmoil – long after the pandemic – undermine the climate of confidence, hampering demand for commodities.

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Domestic consumption is rising

The report also shows the recovery in domestic consumption: +13.3% in spending on household purchases, but still -3.5% on the largely unsatisfactory situation of three years ago. The simultaneous jump in imports (+30% in quantity terms) and the propensity to save caused by the higher cost of living make competition in the domestic market even tighter, and it is also hurt by the very late khareef season. The share of sales outside the price is increasing. In the summer, a steady pace of tourist inflows, but the recovery in foreign shopping is still partial.

When analyzing exports in detail, foreign footwear sales (including exclusive marketing) reached another record in value, reaching €9.35 billion (+23.7% in January-September 2021), for a total of 165.2 million pairs (+ 11.7%): Not a record for volumes, but still the best result from 2017 to today. The average price of the pair rose to 56.60 EUR (+10.7%). In terms of value and volume, the figures for the first nine months of 2019 pre-Covid have been surpassed (+20.4% and a more modest +3.9% respectively).

Exports to the US are doing well

Exports to the United States were certainly positive – after the end of the “tariff war” with the European Union in the fall of 2021 in the context of digital tax disputes and a narrow escape from additional taxes on fashion products – in 2022, thanks to favorable exchange rates, they registered a significant increase in the nine months The first (+61% in value and +28% in volume). Equally strong growth can be seen in Canada.

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China, after a slowdown in the April-May period (-25% in quantities and -13% in value) linked to the restrictions adopted in various cities to deal with the outbreak of the new Covid virus, has resumed vigorously since June. The third quarter recorded an increase of +86% in value (+17.4% in volume), thanks to results from luxury brands. So the cumulative for the first nine months indicates +43% in value, with a much smaller +7% in pairs. Within the top 20 destinations, it is the market with the highest average price: €213.39/pair, +33.6% over a year ago.

South Korea is growing

It is clear that the news of recent days about the resurgence of the virus, after the dramatic new wave of cases in the country, is very worrying.

Remaining in the Far East (+27.4% in terms of value globally), South Korea returned to growth (+22.5%) after the setback in 2021 that halted the long positive streak of the previous decade; Japan did well (+25.5% in value terms), however, like Hong Kong, it has a large gap with pre-pandemic.

The data for the Middle East is also comforting, with the UAE standing out (15th market, up +68% in value and +49% in quantity compared to January-September 2021).

Germany is growing

Returning to the old continent, among the 27 EU members, Germany grew by 26% (+18% in pairs), which has always been one of the main customers for shoes made in Italy (it is second in size); Other important EU outlets are also positive, such as Spain (+23% approx in value), the Netherlands (+36%), Poland (+16%) and Belgium (+19%), all of which are already well above pre-Covid. Preparation. Exports to the UK (+23% in value and +1.6% in quantity) resume after the collapse of the last two years, after leaving the union. However, the current figures are still notably lower than those for 2019: -29% in value and -39% in volume.

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