Spain lost 2,000 textile factories last year, mainly small and midsize apparel manufacturers, on the back of plunging retail sales and anemic lending markets. But rising exports and a string of restructurings are boosting hopes that 2012 will turn the tide for the sector, according to Madrid-based industry observers.
Executives predicted exports will increase 12 to 15 percent this year on top of a 12 percent rise in 2011. The increases result from a growing number of companies scrambling to enter new markets, particularly China, Russia and Brazil, as they rush to lessen their dependence on the anemic domestic market, they noted. Fewer companies will also likely shut down as many have already restructured and laid off enough workers to survive the tough economy, said Carmen Esposito, a textiles manager al leading Spanish trades union CCOO.
Esposito said the industry could lose 5,000 to 10,000 jobs this year, compared to about 15,000 in 2011. In 2010, the industry lost 16,000 workers.
Last year Spain exported $2 billion worth of apparel, $1 billion of textiles and about $800 million of footwear, according to a spokeswoman at leading apparel federation Fedecon. The result showed companies’ international promotional efforts are paying off. Exports increased 9 percent in 2010 and 7 percent in 2009. Meanwhile, imports have been declining gradually, falling 7 percent last year.
“Selling outside Spain has become a priority for most companies,” the spokeswoman said. “This wasn’t the case a few years ago but given how much local sales are declining, it certainly is now.”
According to experts, retail sales fell by as much as 10 percent in 2011, matching similar declines in recent years and forcing many firms to the financial brink. High-end shirt maker Artesanos Camiseros recently filed for bankruptcy while once high-flying fashion retailer and designer Adolfo Dominguez is struggling, with plans to close many international stores and lay off workers. After seven consecutive years of losses, stretch-fibers maker Dogi filed for creditors’ protection last May. Another large firm, denim maker Saez Merino, liquidated in fall 2008 after axing thousands of workers in several restructuring attempts.
Amid this difficult backdrop, Spanish clothing manufacturers are rushing to grow in overseas markets.
Currently, about 80 percent of Spanish exports go to key European markets like the U.K., France, Germany and Italy. Of the remaining 20 percent, the U.S. accounts for 40 to 50 percent of sales while Russia and Mexico take 20 percent, according to Jaime Guerrero, founder and owner of Guerrero Fashion Consulting in Barcelona. The rest goes to other emerging markets, mainly China, India, the United Arab Emirates and South America, notably Chile, he said.
Observers expect this breakdown to change, forecasting 30 percent of Spanish clothing will be exported by 2017 when markets such as China and Brazil could have the same weight as Russia and Mexico and “Made in Spain” apparel could have a bigger presence in India and Southeast Asia.
Helped by export promotional agency Icex, Spanish firms are currently focusing on deepening their presence in the U.S., Russia and Mexico. According to Guerrero, upmarket labels Caramelo and Florentino sell well in Mexican department stores like Palacio de Hierro, Sears and Liverpool. Other sportswear and ready-to-wear brands such as Nautica, Mayoral, Fuente Capala and Macson are doing well abroad, as are children’s brands Tuc Tuc and Tutto Piccolo.
These companies are piggybacking on the success that Spanish retail chains Inditex, owner of Zara; Mango, and Cortefiel have had internationally and are emulating some of their strategies to boost their fortunes, observers said.
Guerrero said Spain has done a good job of crafting an image as a premier supplier of stylish ready-to-wear, carving a niche against France and Italy, which have focused more on the luxury end of the fashion market.
“In Spain, we have very good quality and design-driven clothing at a mid-range price,” Guerrero noted. “These are clothes that everyone can wear. It’s pret a porter with style.”
Spanish brands are promoting this know-how when going to international fashion shows. However, because money is tight, many firms have teamed to form related-product groups to attend the events.
“It’s a war of little wars,” Guerreo said, adding that 80 to 90 percent of Spanish apparel manufacturers are small shops employing 30 to 40 people. “There are no loans out there and while the Icex helps you finance exports, you have to move around with your own capital.”
Echoing other observers, Guerrero said the government must help promote Spanish companies — not just “Made in Spain” fashion.
“They are too concentrated on the ‘Made in Spain’ but the ones who really need help are companies themselves. They need capital to streamline their operations, develop better and more value-added collections and hasten time to market.”
Unfortunately for many, the government’s textile support program, which handed the textile sector some 800 million euros, or $990.4 million at current exchange, between 2006 and 2008, has ended.
“In 2010, we lobbied for a new textiles aid package [the 2005-2010 program expired that year] but the government told us they didn’t have a nickel,” Esposito said.“They said that if they helped us they would have to help the more troubled auto and construction industries, which we understood.”
Despite this, Esposito criticized the government for failing to support Spain’s fashion sector. “They recently hired a Russian company to design Spain’s Olympic team uniforms,” she said. “I simply don’t understand why they couldn’t hire Spanish companies to do this. We have much better fashion here.”
Esposito said falling retail sales are not the only reason for the closure of 1,200 firms last year. She said many firms, including Inditex, Cortefiel and Adolfo Dominguez, have moved manufacturing out of Spain. This, coupled with an invasion of Asian apparel in the mid 2000s, has meant the sector has lost more than half of its workforce since 2000. According to Esposito, it now employs 120,000 people compared to 250,000 12 years ago.
Given much lower wages in Morocco, China, Turkey, Egypt, Tunisia and even Portugal, Spanish firms have outsourced their production. Spain must work harder to win orders for more fashionable, quick-turnaround items, observers said.
“Making clothing in Spain costs EUR25-30 cents a minute but in Morocco it is 12-18 cents and in some Asian countries 10 to 13,” Guerrero noted. “All the long-production items have been moved there. But because we have good design at reasonable prices, we can still compete with short-production of repeat items.”