The fashion industry may be in for a bumpy ride in 2024. A report from McKinsey finds that the industry has seen a post-pandemic resurgence with record profits in 2021 and 2022. In 2023, however, the industry began to see a slowdown due to weaker demand and slowing sales. 

McKinsey’s fashion forecasts put top-line growth at between 2 percent and 4 percent in 2024, with the luxury segment slated to bring in the highest profits. Overall, however, the segment is expected to slow 3 percent to 5 percent growth, down from 5 percent to 7 percent in 2023. 

Meanwhile, the European market is expected to expand by between 1 percent and 3 percent, down from 5 percent in 2023. 

Experts believe slumping consumer confidence and declining household savings are the two major causes of falling sales. The Ukraine-Russian war along with Israel-Hamas conflict is also putting a strain on the fashion industry. 

The report noted that 62 percent of executives cited geopolitical instability as the top risk to growth, while 55 percent said economic volatility was their greatest concern. Inflation was also a top worry among executives, with 51 percent saying this would have an impact on the industry. 

The global average headline rate of inflation is predicted to moderate to 5.8 percent, down from 6.9 percent in 2023.

Experts believe this uncertainty reflects a broader economic situation. Financial constraints on household incomes are predicted to affect the apparel industry as well as affect trade with regions like India, despite executives in this region having a more positive outlook. More than 85 percent of Indian-based executives said that conditions had improved over the past six months.  

Leadership at McKinsey recommends that fashion companies examine 10 key themes as they continue to face financial challenges in 2024, including to be on the alert for opportunities and develop contingency plans. 

Experts are also advising businesses to stay on top of costs and expect an increasingly competitive environment. 

Despite these challenges, experts believe hard luxury goods, like jewelry, watches and leather, will remain in high demand due to their investment nature.