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Challenging times for clothing and footwear retailers in Poland

08-25-2009 08:07 PM CET | Fashion, Lifestyle, Trends

Press release from: PMR Publications

Challenging times for clothing and footwear retailers in Poland

2009 has been a very difficult year for clothing and footwear retailers. With falling sales and rising operational costs, most companies are facing financial difficulties. As a result, many are launching restructuring programmes while actively looking for an investor which could help them to survive.
According to estimates included in PMR’s latest report, “Clothing and footwear retail market in Poland 2009. Market analysis and development forecast for 2009–2011,” the value of the clothing and footwear market will shrink by more than 6% to PLN 25.5bn in 2009, in the wake of declining demand and falling spending on clothing and footwear as a result of rising unemployment, slower growth of salaries and poorer consumer confidence caused by the financial and economic crisis in Poland and worldwide.

PMR expects that in the subsequent years, the clothing and footwear market should return to the upward trend—for 2010 sales growth is forecast at 5%. “With the more optimistic situation in the economy, the overall consumer climate will improve as well and consumers will be again more willing to spend on clothing and footwear. This view was also shared by retailers who participated in research carried out by PMR for the purpose of the report: two-thirds of respondents expect improvement in the market situation in 2010,” according to Patrycja Nalepa, Retail Analyst at PMR.

Threats and opportunities
“2009 has been a very difficult year for clothing and footwear retailers,” states Patrycja Nalepa of PMR. “The more challenging financial standing of consumers has forced them to limit their clothing and shoe shopping. The retailers’ situation is made worse still by rising costs which have inched up as a consequence of the low zloty exchange rate—EUR-denominated rates for the lease of space in shopping centres as well as the costs of importing goods are both upward bound. As a consequence, most companies are experiencing financial difficulties, and many are looking for an investor who would make it possible for them to continue to operate.
On the other hand, the crisis may create an opportunity for one-of-a-kind conditions enabling the takeover of companies which have fallen on hard times. In addition, it is now easier to find a good location and to enter a lease on good terms and conditions, as shopping centres are now looking for new tenants to replace the liquidated shops. The crisis will be beneficial also for those companies that offer inexpensive clothing and footwear as their goods are now in highest demand.”
For the purposes of this report, PMR carried out a survey amongst operators of the 157 clothing and footwear chains operating in Poland. One of the questions concerned the assessment of current threats to their development.
The companies were to assess the proposed current threats, using a scale on which ‘0’ signifies that the given obstacle does not constitute a threat to the company’s development and ‘5’ signifies the maximum impediment to the development of the respondent’s company.
It appears that increased rents at shopping centres, a direct result of the higher euro/zloty exchange rate, currently constitute the greatest threat to clothing and footwear retailers. The second most serious threat to companies is represented by increases in the prices of imported goods and materials, which are associated with the weak zloty/dollar exchange rate. The third most important threat, as perceived by the companies surveyed, is reduced demand, resulting from deterioration in the financial standing of households.

Countering the crisis
“In order to survive and cushion the impact of the economic slowdown as much as possible, companies launch restructuring programmes—reduce operating costs, abandon the least profitable concepts and limit or suspend investment projects both in Poland and abroad. This is the time of firms’ strategy review and an opportunity to strengthen the position for the best-managed companies,” Patrycja Nalepa added.
When asked about steps taken to respond to the difficult market situation, most companies said that they had cut marketing and advertising spending (73%). The second most common action taken to limit the effects of the crisis is the introduction of discounts and more frequent discount sales (56%). In addition, more than half of the companies are closing the least profitable stores, whereas fewer than half are reining in plans for new establishments. Other actions currently being taken by clothing and footwear retailers include: workforce reductions, the development of a cheaper range, with simpler and more conservative garments, and a focus on the development of a franchise chain.

This press release is based on information contained in the latest PMR report entitled “Clothing and footwear retail market in Poland 2009. Market analysis and development forecast for 2009–2011.”

For more information on the report please contact:
Marketing Department:
tel. /48/ 12 618 90 00
e-mail: marketing@pmrcorporate.com

About PMR

PMR Publications (www.pmrpublications.com) is a division of PMR, a company providing market information, advice and services to international businesses interested in Central and Eastern European countries and other emerging markets. PMR key areas of operation include market research (through PMR Research), consultancy (through PMR Consulting) and business publications (through PMR Publications). With over 13 years of experience, highly skilled international staff and coverage of over 20 countries, PMR is one of the largest companies of its type in the region.

PMR
ul. Supniewskiego 9, 31-527 Krakow, Poland
tel. /48/ 12 618 90 00, fax /48/ 12 618 90 08
www.pmrcorporate.com

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