MILAN — The brisk rebound fashion is experiencing has had exceptional ripple effects on textile makers, which are amassing orders and trying to cope with the overloaded supply chain to ensure deliveries. But prospects may not be as rosy, with analysts predicting inflation could trigger a recession as early as next fall.
During the three-day textile trade show Milano Unica — which closed Thursday drawing 4,052 visitors, up 31 percent compared to the same edition last year — executives were bullish about the present but still cautious, noting that brands and retailers are overstocking fabrics to refill their depleted warehouses after two years impacted by the pandemic and for fear that costs of raw materials, logistics and energy will further skyrocket.
In the first quarter of 2022, revenues of the sector jumped 34.3 percent on a like-for-like basis, although sales figures were not available yet, while exports registered a 46.2 percent gain to 816 million euros, poised to grow further in light of the dollar almost hitting parity with the euro this week.
“Growth is experienced across the board, but especially in Europe and the U.S., less so in Asia,” said Milano Unica president Alessandro Barberis Canonico.
“When markets are positive, companies are more eager to return to investing… however the instability on orders and revenues is dictated by raw materials and energy costs, and we hope Europe will intervene on the latter as current levels could trigger a recession,” he said.
“We can hardly explain why the market is so well-performing despite the recession and inflation. Investors, too, did expect the Russian-Ukrainian war to dent consumer confidence,” Claudia D’Arpizio, a partner at Bain & Company in Milan, explained during the fair’s opening ceremony.
She predicted order books will be crammed for the fall 2023 collections, presented by the 445 exhibiting companies at the fairgrounds, also lifted by American brands and retailers reshoring production from China, thus benefiting European and Italian manufacturers. This will generate substantial revenues until the first half of 2023, she predicted.
“Contrary to other sectors, current sales are a compensation for lost revenues,” Barberis Canonico said.
According to Andrea Crespi, Eurojersey’s managing director, amid “social weakening caused by inflation, supply chain woes, different consumers’ needs, it’s going to be a revolution… If retail sales drop 20 percent [in coming months] and brands are left with a 20 percent overstock, textile makers will lose 40 percent in sales,” he forecast.
“The current ‘boom’ in sales is a direct effect of lockdowns and closures over the past two years,” echoed Canepa’s commercial and marketing director Patrick Lonn. “With increased prices and sales having reached a peak, fall 2023 could mark a different scenario,” he said, predicting the company will hit revenues of around 22 to 23 million euros in 2022. In spite of the context, the company is committed to gaining back its market share in the luxury segment, eroded as it went through financial troubles over the past few years. It will also welcome a creative director next week, but his name has not yet been disclosed.
Long-term planning is what Italian companies are supposed to leverage to face future challenges and instability.
“We are facing unprecedented changes and challenges because the fashion business model will shift, so we need to make long-term investments to anticipate that,” said Matteo Mantellassi, chief executive officer of Manteco. The company’s sales in the first half have already surpassed 2021 levels by 50 percent, he said, though the company continued to post profits even during the pandemic.
“Our business is growing threefold versus competitors, despite prices being averagely 20 percent higher. That’s because we established a trusted relationship,” noted Fabio Tamburini, CEO of Cotonificio Albini, the Albini Group’s production arm, which expects to post revenues in the region of 130 million euros this year and is registering a 60 percent growth in like-for-like fall orders. “We’re aiming to consolidate our volumes and grow organically in the 5 to 6 percent range,” he said.
On the contrary, Tessitura Monti, once a powerful competitor in the sector, recently received a green light from the Italian government to postpone the sale of its assets until Nov. 30. This is part of the special administration procedure it entered last year ensuring production continuity as it seeks a buyer.
Overall, executives noted that increases in raw material costs are less hampering than energy costs, with the latter being reflected in their collections’ price points, which on average have jumped by 15 to 20 percent.
“In June we were forced to raise in-season prices, and we will need to get accustomed to that,” said Lanificio Fratelli Cerruti’s CEO Filippo Vadda. This won’t prevent the company from doubling revenues in 2022 after it guaranteed full-speed production capacity in the first months of the year.
At velvet specialist Redaelli Velluti, a 35 to 40 percent increase in unit price per meter mirrored the disrupted scenario, worsened by the time- and energy-consuming manufacturing process core to that fabric.
“It’s hard to make the market understand how dependent on energy is our production, and there are only two ways forward: lowering quality or keeping it as is and paying higher prices,” explained Pierluigi Fusco Girard, CEO of Marzotto Lab, the division of Marzotto Group which includes Redaelli Velluti. He forecast revenues will grow between 15 and 20 percent in 2022.
“It’s not the moment to fight over prices,” echoed Lonn. “We’re embedding an added value, leveraging innovation and sustainability” to help brands digest pricier fabrics, he said.
In the worst-case scenario, executives agreed, inflation will severely impact the bottom line, denting companies’ investment prowess. “We haven’t experienced like-for-like increases this high for the past 10 seasons,” said Barberis Canonico.
D’Arpizio also observed fashion companies are increasingly placing their orders earlier for fear that production hiccups could cause delays. Lead time is indeed an unresolved issue, which she urged companies to commit to.
“We don’t expect [market] stability in the near future, rather a return to pre-COVID-19 business trends, be they customization or more fragmented buying sprees than we’re witnessing today. But within a recessive environment that will call for caution and short-term planning,” the analyst said.
Ercole Botto Poala, CEO at Reda, underscored how the supply chain is overstressed and went as far as to say that, come fall, production could be halted for lack of gas supply, while generally forecasting a great start of the season that should lift the company’s revenues for the year to 100 million euros.
The scenario partly explains why brands are overstocking solids and traditional fabrics, ubiquitous at the fair. A few companies have been sensing this trend in advance and provided clients with such services, such as Albini Group’s Textum, a stock service boasting 70 different textiles ready to be cloth-dyed or printed.
Elsewhere, Redaelli Velluti is providing clients with garment-making experts to ensure velvet is treated at its best, while Maglificio Maggia has been retooling its contracts with suppliers to ensure supply at the beginning of each season.
Against this business backdrop, textile makers acknowledged that the ongoing casualization has shifted fashion trends, but D’Arpizio added that the post-streetwear wave has given way to clothing that is interchangeable whatever the occasion and geared toward self-expression.
Lanificio Fratelli Cerruti was among the wool mills embracing the trend, working damier, gingham and Vichy patterns for woolen fabrics that stood out for their tactile effect.
“Consumers buy fewer suits but when they do, they’re geared toward building a more sophisticated look, it’s no longer a business duty, it’s a fashion statement,” Vadda offered.
To this end, the fall collections hinged on a 3D and tactile look and feel aimed at showcasing craftsmanship and know-how, with natural fibers, particularly wool — the more recycled and less treated, the better — standing out and suggesting textile companies are progressively embracing circularity.
“Wool is having quite a momentum,” said Francesco Magri, regional manager for Central and Eastern Europe at The Woolmark Company, which teamed with Zegna Baruffa Lane Borgosesia to launch a campaign highlighting the fabrics’ naturally biodegradable and performance features. “It’s long-lasting and embraced by luxury and sportswear companies alike. The latter are veering away from polyester and towards natural fabrics,” he claimed.
At Maglificio Maggia the patented µGG12.9 carded textile was already scooped up by some luxury brand for suiting, while its Retrieve range of upcycled cashmere had a circularity component, which was also core to Vita by Manteco, a range of wool or wool and regenerated nylon blends crafted from the signature regenerated MWool, now assessed according to LCA principles, and designed according to an eco-design basis.
Madras, tartans and checkered options were all the rage, appearing on Eurojersey’s printed Sensitive Fabrics; on cotton and Tencel flannels part of Albini Group’s shirt options; at Reda in its Attitude collection of merino wools, weighing roughly 13 ounces and bearing Prince of Wales patterns, and in Vitale Barberis Canonico’s Shacket line of overshirt-intended wools. The latter mill also debuted GRS-certified carded flannels featuring 40 percent recycled wool.
At Redaelli Velluti, the 3D effect was provided by wild animal, psychedelic and folk motifs achieved via ink jet prints, corrosion and employing the tie-dye technique. The company also introduced velvet fake fur crafted from cotton or viscose and other man-made yarns.
Earthy tones were ubiquitous, often deep and saturated, as was the case with Albini Group’s recently industrialized Re-Oxyde dyes obtained from iron oxidation and applied to velvet-looking corduroy overshirts and Maglificio Maggia’s Shetland-looking jerseys blending cashmere and camel hair.
Sustainability is a given today, but companies were particularly proud of their most recent achievements on that front, including Botto Giuseppe for its Slowool Earth, a group of Cradle-to-Cradle certified, RSW flannel, grisaille, and cloth available in five colors, and Canepa with its nylon and viscose, developed in partnership with Fulgar and Södra, respectively, both biodegradable within five years. Albini Group’s Tamburini said that he aims for the company to only be manufacturing sustainable fabrics by 2025.