Country risk? The coronavirus shifts the threat to mature countries

Italy, Germany or the United States. The risky country, traditionally associated with emerging markets due to its instability and uncertainty, now has a full impact on the havens of retail giants. With the current threat on sourcing which China is on the path of overcoming, leaving behind the worst of the coronavirus. Now arises the great impact for the sector’s accounts: the blow to its biggest markets.

Italy has proceeded to closing all its retail stores in the country a measure to contain the spreading of the coronavirus, excluding those that attend to the basis necessities like pharmacies, supermarkets, grocery stores, kiosks, and fuel stations. A measure that directly affects fashion and represents a significant risk if it transpires to other countries, since, despite being a globalized sector fashion continues to depend on mature markets.

For the main operators of the fashion sector, Europe is its main market, both in terms of number of stores and revenue. Luxury concentrates most of its business in Europe. The three luxury fashion groups in Europe, LVMH, Kering and Richemont have more than 2,000 stores and a tallied revenue of 16 billion euros ($18.1 dollars).

LVMH, Kering and Richemont have more than 2,000 stores in Europe

LVMH, the main luxury group in the world, reached sales of 10.2 billion euros (11.5) in the region, which represents 19% of the group’s total revenue. The group’s commercial network in the region reaches up to 1,177 directly operated stores.

As for Kering, Europe represent 33% of its sales, where it has 362 stores that are directly operated, while the third largest luxury group in the world, Richemont, has 24.4% of its business in Europe.

Europe is also the kingdom for large distribution. Of the world’s top four operators, two are European: Inditex and H&M. For Gap and Uniqlo, the European market doesn’t stand as its main market, although they do plan on expanding their presence in the continent.

Uniqlo operates with a hundred stores across Europe, where 40% of its sale are concentrated. Gap for its part, only has 115 stores in the region which account for 4% of its total sales.

Sport also counts Europe as its main source of income. The revenue of Adidas in the region represents 25.6% of the group’s total sales, while for Nike it represents 25%.  The Americans VF and Levi’s, concentrate 41% and 30% of their sales in the region.

Europe is home to two large fashion distribution giants: Inditex and H&M

Italy is currently the most affected country by the pandemic in Europe. The virus has killed around 820 people and affected 1,500. In addition to proceed with the closure of all retail stores, yesterday, the Italian government approved the allocation of funds of up to 25 billion euros to face the repercussions of the crisis.

For the majority of retailer, Italy is a key market. Inditex has 390 stores across the whole of Italy, of which 101 of stores are that of Zara. The second concept of the group that also has a great presence in the country is Stradivarius, with 84 stores, followed by Bershka, which has 67 points of sale. Oysho, Zara Home, and Pull&Bear operate with 41, 33 and 8 stores respectively. The Spanish giant first entered the Italian market in 2002 with the Percassi group and until today, the territory remains a key market for the company.

The Swedish giant H&M has 181 stores in the Italian market, the sixth largest market for the group by revenue. The company reached sales of 8.4 billion million crowns (884 million) in Italy last year.

Italy is also a significant market for Primark. The Irish low-cost fashion chain entered the country in 2016 and currently counts with five stores within the Italian market. Fast Retailing operates with just one store in Uniqlo in Milan.

The new imposed measure by the government also directly affect the main department stores of the country, Coin, the company which has been under the control of Centenary SpA for many years now has 290 department stores in Italy and reaches sales of 4.5 billion euros (5.1 billion dollars).

Italy has already closed all retail stores

The main European market has also taken measures before the coronavirus. Yesterday, the number of affected in Germany revolves around 1903 people, while three have died. The country has advised to cancel public events that require more than 1,000 people in order to combat the spreading of the virus. The country is currently in a situation like that of Spain and France, and one week behind of Italy.

If the pandemic spreads in Germany, fashion could also be one of the most affected area. The country is the largest market for the Swedish giant H&M, where it has a network of 468 stores and a revenue of SEK 32.4 billion (3.4 billion dollars), which represents 15.3% of the group’s total sales.

Germany is Fast Retailing’s third largest biggest market in Europe, with nine stores, while Inditex has 134 stores in the country, of which 77 are of Zara, 15 of Zara Home, 17 of Massimo Dutti, and 14 of Bershka.

Furthermore, other major retailers in Germany are the Kaufhof department store. The group, owned by Canadian giant Hudson’s Bay, last year sealed a joint venture with Austrian warehouses Kastadt, owned by the Signa group, and created a €5 billion giant and 243 stores.

In France, municipal elections are at risk of contagion

In France, for its part, the coronavirus has left 1,787 infected and 48 deceased for now. The Gallic government has also joined the recommendation to ban meetings of more than a thousand people. The country, which was the first affected by Covid-19 in Europe, also sees threats in the municipal elections, which for now have not been canceled.

The country is the birthplace of the two luxury giants, LVMH and Kering, as well as one of the largest fashion markets in Europe. Bernard Arnault’s conglomerate invoices 19% of its sales in its local market, while for Kering it also represents a high percentage of its revenue.

Large retailers also concentrate a large part of their business in France. Inditex has 290 stores in the country, the bulk of them, 123, from Zara. Of the rest of the stores, 22 belong to Zara Home, 38 to Pull & Bear, 19 to Massimo Dutti, 52 to Bershka, 24 to Stradivarius and 12 to Oysho.

H&M, for its part, concentrates 5.3% of its sales in France, where it has 237 stores, while for Uniqlo, the French market is its largest territory in Europe, with twenty-four points of sale. In the case of Primark, the group has fifteen stores spread across the country.

In parallel, the 290 stores in the Galeries Lafayette group of department stores could also be affected by the threat of contagion of coronavirus and the risk of its spread throughout the country. The company, the largest in its segment in France, invoices 4.5 billion euros ($5.1 dollars) a year.

Inditex concentrates 108 stores in the United Kingdom

Although Brexit has broken its relations with Europe, the coronavirus has also reached the United Kingdom, although the risk is below that of other countries in Europe. The British country currently has 459 infections, the lowest number in Europe, and eight deaths. Like Germany and France, the government’s provisional measures only go through the recommendation to avoid meetings of more than a thousand people and the cancellation of mass events.

The large retailers also count in the country as one of their main main consumer markets. Inditex concentrates 108 stores in the region: 62 from Zara, 12 from Zara Home, 8 from Pull & Bear, thirteen from Massimo Dutti, six from Bershka and six from Stradivarius.

For H&M, the United Kingdom is one of its largest markets, where it concentrates 6.5% of its sales and 304 stores, while Fast Reatiling operates with thirteen Uniqlo stores in the region.

The country is also the main market for the United Kingdom by number of stores, where it concentrates 189 stores. In parallel, one of the world’s largest department stores is also native to the United Kingdom. Marks & Spencer has 428 stores in the country and a revenue of 3.5 billion pounds ($4.5 billion dollars).

In Spain, 84 deaths have already been accounted for by Covid-19

In Spain, the coronavirus has already spread panic. Yesterday, the country had 2,968 infected and 84 deaths, similar to the situation in Italy a week ago. In fact, some communities such as Madrid, La Rioja, Galicia, the Basque Country and Catalonia have proceeded to close schools and cancel major events.

If the situation continues, Spain would be forced to take measures similar to those of Italy, such as the closure of all retail trade. If this measure is carried out, fashion, as in other countries, would be one of the main affected. Specifically, Inditex, which has 1,635 stores in its local market.

For H&M, Spain is also one of its main markets, where it concentrates 3.5% of its revenue with 172 stores. For their part, Uniqlo and Primark have four and 46 stores, respectively, in the country. For El Corte Inglés, the third largest group of department stores in the world, the closure of stores would paralyze the activity of 91 centers.

Across the pond, the United States has already taken action against the coronavirus, although it is a week at risk from Europe. After President Donald Trump downgraded the importance of the Covid-19, he backed down on Wednesday and announced the suspension of "all travel from Europe" to the United States for the next thirty days. For now, the country has 696 cases and 25 deaths.

Gap concentrates 80% of its business in the United States

The world’s leading power is also the largest market for fashion. Luxury concentrates a large part of its revenue in the country, with LVMH, which concentrates 24% of its revenue in the country, and Kering at the head. For Richemont, meanwhile, the United States represents 15% of revenues.

The country is the cradle and kingdom of Gap, where it invoices 13,340 million dollars ($13 billion), 80% of its sales and with 2,938 stores. For VF and Levi’s, their local market represents 58% and 53% of their revenue, while L Brands concentrates 2,717 stores.

The United States is also the birthplace of two other heavyweights: Nike and Macy’s. The largest department stores in the world invoice 24.6 billion dollars in the country, with 795 stores. For Nike, its business in the United States accounts for 40% of sales and its competitor, Adidas, has gradually gained positions in the country, where it concentrates 22% of its business.

Even though it was one of its first international destinations, Inditex has a reduced presence in the North American country in which it has 102 stores, of which 92 of them are of Zara and he rest of Massimo Dutti and Bershka.

H&M for its part, 11.7% of its sales derive from the North American country and has 578 points of sales, while Fast Retailing operates with 51 stores in the United States, which represents one of its main international markets.