High fashion growth likely in Middle East, N America in 2023: McKinsey

The Middle East and North America are expected to have the highest growth potential in 2023, as executives deprioritise countries like China in the short term.

The war in Ukraine, rising inflation and supply chain pressures are the biggest threats to the fashion industry in the run-up to a challenging year ahead, says The State of Fashion 2023 released today by The Business of Fashion (BoF) and McKinsey. The Middle East and North America are expected to have the highest growth potential in 2023.

The industry will be buoyed by luxury, with global sales in this category expected to grow up to 10 per cent in 2023, compared to up to 3 per cent for the rest of the industry, the report says.

Fifty-six per cent of fashion executives expect conditions to worsen in 2023, an official press release issued by the two companies said.

The fashion industry recorded a strong recovery emerging from the pandemic. Global industry revenue in 2021 grew by 21 per cent year on year and continued to climb in the first half of 2022, with revenue increasing 13 per cent.

However, a number of unprecedented challenges chipped away at any gains and slowed progress as the year progressed.

Eighty-five per cent of fashion executives predict inflation will continue to be a challenge next year and 58 per cent believe the energy crisis will continue to weaken the market.

While the report predicts an overall slowdown for the industry, there are some opportunities. Sales of luxury fashion are expected to grow globally between 5 per cent and 10 per cent in 2023, compared to between minus 2 per cent and 3 per cent for the rest of the industry.

Fashion companies overall have been able to build robust foundations in 2021 and in the first half of 2022 to help them weather the storm. The proportion of ‘value destroying’ companies—those generating negative economic profit—is now at its lowest since 2013.

Fibre2Fashion News Desk (DS)