Barcelona Demonstrations, Brexit Dent Growth of Spain’s Fashion Sector

James Fallon and Ivan Castano

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MADRID — Take a step forward, then take a step back.

That is the way some observers feel about Spain’s textiles and apparel market, which they claim is starting to show signs of weakness amid a slowing economy, geopolitical uncertainty and a growing separatist crisis with Catalonia, the wealthy region home to Barcelona. This contrasts with gradual yet solid gains in the past five years when executives celebrated the industry’s recovery from the 2008 financial crisis and the major real-estate bubble that followed it.

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“We are not making progress,” said Carmen Esposito, who leads the textiles and apparel chapter at Spanish trade union Comisiones Obreras. “We were growing 2 to 3 percent after 2014 [when Spain began to emerge from the financial meltdown] and added many jobs last year. But this year everything has stopped.

Textile production and exports, which Esposito specifically tracks for the union, are expected to gain 0.9 percent and 0.4 percent, respectively, she said, mirroring gains posted last year. In 2017, textile and clothing output gained 1.5 percent while exports were much stronger, added Esposito.

Still, she noted that the industry’s health has improved since 2008-09 when 70,000 to 80,000 jobs were lost in the downturn as five to six textile factories closed a week. Headcount currently stands at around 110,000, up from 88,000 five years ago.

Uncertainty surrounding Spain’s cooling economy (GDP will grow 2.2 percent, versus 2.4 percent last year), Brexit and the U.S.-China trade war is weighing on consumers, who are curbing apparel purchases in favor of cellphones, gadgets or travel, Esposito claimed. This, coupled with the growing secession crisis in Catalonia, which has triggered massive demonstrations, will also hurt sales in the region and likely spill into the national numbers, she added.

Eduardo Zamacola, president of top textile trade lobby Acotex, said Barcelona’s situation looks grim.

“I have several stores in Barcelona and sales were zero, zero, zero and zero every day,” Zamacola noted, adding that opening hours at his children’s wear chain Neck & Neck were reduced, in line with most other retailers. “Customers are not coming in. There is no shopping atmosphere.”

Some merchant groups claim sales fell 30 to 50 percent last week after Spain’s Supreme Court voted to jail nine Catalan separatist leaders for illegally orchestrating an independence referendum in 2017. The decision unleashed heavy protests in Barcelona, with 500,000 people marching 10 days ago in an event that triggered violent riots and destruction of prime real-estate and monuments. A Zara stores in nearby Lleida burnt while a Foot Locker and MediaMart were looted, observers said.

Zamacola estimated overall merchant losses at 70 percent during last week and 40 percent for all of October, countering some of the local views, which seemed to tamp down the demonstrations’ negative impact.

He worries that the unrest could have a contagious effect across Spain.

“During the 2017 protests, sales fell 35 percent in Catalonia and 13 percent in Spain,” he recalled. “If this continues, people are not going to want to shop in other cities. This does not look good.”

On the upside, fashion sales at retail are up 2.4 percent so far this year, a turnaround from a 2.2 percent decline in 2018, to 17 billion euros. They could increase 3 percent if the holiday season goes well, Zamacola claimed.

He said weather has been exceptionally good, with summer temperatures lasting well into the fall and allowing merchants to sell all of their summer stock.

Contradicting Esposito, he noted consumption has remained relatively healthy, though the acknowledged the numbers are nothing to celebrate, at least when viewed against loftier gains in 2007 or 2008.

“This is not spectacular and it’s true that we are not selling like we used to,” said Zamacola, adding that textile and apparel sales plunged 35 percent during the financial malaise more than a decade ago.

Zamacola said it’s possible for production and exports to grow 1 percent and retail sales 2 percent as there can be a significant lag between when a product is made to when it reaches stores.

Spanish apparel exports are also unaffected by U.S. President Trump’s recent rollout of tariffs against European goods, according to Zamacola.

While some European leather goods brands may be affected, the bulk of Spain’s pret-a-porter clothing segment, which pays an average of 15 percent to enter the U.S., won’t be, he said.

Spanish brands are also beginning to shift production back to Spain after years of moving it to Southeast Asia, he said.

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