Retail Flash: insights from key footwear markets

In 2024, French retail sales struggled, with footwear sales down by 2.7% in July compared to June and down by 1.5% compared to the same month last year. This drop reflects broader struggles in the retail sector, including declines in clothing and textile sales. Although tourism increased during the Olympics, this did not boost in-store sales.

Footwear prices remained stable and even showed slight negative inflation in June, helping consumers plan their spending better. Retail confidence hit its lowest point in June and July but has started to improve, with a small rise in consumer confidence.

Looking ahead, the sector is cautious due to political and economic uncertainties. Business leaders are worried about possible snap elections, tax increases and consumer hesitance. While footwear imports surged in early 2024, they have since decreased as retailers manage their stock. However, a slight drop in bankruptcy filings among small and medium enterprises suggests a possible gradual recovery.

Germany

The German economy faces mixed prospects, with leading economic institutes forecasting a tiny contraction of 0.1% in 2024. Retail sales experienced growth, increasing by 3.6% year-on-year in April, but footwear retail is struggling. The sector is expected to decline by 2% in the first half of the year due to weak consumer sentiment and unseasonable weather.

Despite stable footwear prices, consumer confidence dropped significantly from July to September, as households felt less confident about their financial situation. Unemployment has increased by 200,000 people compared to last year, further affecting spending.

Retailers are also reducing the number of physical stores, with about 100 shoe retailers closing in the first half of 2024. The rise of direct imports from platforms like Shein and Temu has added to this pressure, with an estimated 400,000 parcels entering Germany daily, evading European Union regulations.

Stabilizing inflation and rising wages provide some hope, despite challenges. However, declining retail confidence and plans by many footwear retailers to reduce orders for Spring/Summer 2025 leave the recovery path uncertain.

Japan

Japan's retail sector has shown resilience in 2024, with overall retail sales increasing by 2.8% year-on-year, mainly due to growth in online retail. However, fashion retail is struggling, with a 22.8% drop in clothing and accessories sales since April.

Bankruptcy rates have increased, particularly in the construction, manufacturing and retail sectors, driven by rising costs and higher debt servicing following the Bank of Japan interest rate hikes. On the positive side, consumer spending grew by 0.9% in the second quarter, and tourism is set to surpass pre-pandemic levels, which could aid the retail sector to recover.

Economic indicators show a mixed outlook. Inflation has stabilized between 2% and 3% over the past year, though the weakening yen (which reached a 38-year low against the dollar) has raised import costs. Footwear imports decreased by 8 million pairs in 2024 despite a 2.5% increase in value, reflecting the difficulty of managing higher costs amid falling demand.

With business confidence at a seven-month low, uncertainty around Japan's fiscal and monetary policies remains. Retailers and consumers are likely to remain cautious as political and economic pressures continue to impact the market.

United Kingdom

UK fashion and footwear retailers had a mixed performance in 2024. Sales hit a low point in April but began to recover over the summer. Cooler weather and high household costs negatively affected sales in June, especially for weather-sensitive items.

The back-to-school and work season in September boosted demand for children's and adult apparel, providing a modest lift. Despite ongoing challenges, the sector hopes to maintain positive momentum leading into the holiday season.

E-commerce has stabilized at around 28% of total retail sales, reflecting a sustained shift in consumer habits since the pandemic. Footwear prices have entered deflation, as retailers heavily discounted to clear summer stock.

Import figures suggest a potential improvement in retailer confidence as they prepare for the festive season. However, consumer caution and geopolitical tensions impacting supply chains could dampen recovery prospects.