Meet 2024’s biggest winners

The lion’s share of economic profit within the global fashion industry continues to be generated by luxury companies with LVMH in first place, Hermes in fourth place and Richmont in sixth position. Credit: viewimage / Shutterstock

During a live webinar hosted by McKinsey & Company, senior partner and global leader of McKinsey’s apparel, fashion & luxury sector, Gemma D’Auria, explains every year her team reveal the super fashion winners list. 

The list comes from McKinsey’s Global Fashion Index and is based on 400 publicly listed companies being tracked over time based on their economic profit.

She notes that the super winners list is based on 2023 data as that’s the last full year of data available. McKinsey is “conscious that many things have changed in 2024,” but it still provides some insights into what’s happening within the wider fashion industry. 

At the top of the fashion super winners list for 2024 was French luxury fashion conglomerate which owns Louis Vuitton, Dior and Fendi. LVMH accounted for about 17% of the economic profit of the entire industry in 2023 and generated as much economic profit as the next two companies combined, which, were Spanish fashion conglomerate Inditex and US sports giant Nike.

She also highlights the “lion’s share” of economic profit within the global fashion industry continues to be generated by luxury companies with LVMH in first place, Hermes in fourth place and Richmont in sixth position.

Further down the list Kering, which owns Gucci, Saint Laurent, Bottega Veneta, Balenciaga, Alexander McQueen sits in 8th place and Coach and Kate Spade’s owner Tapestry Inc takes 15th place. Meanwhile, Italian luxury fashion house Moncler is a first time entry in the top 20 and takes 20th place. 

On the face of it, the results show promise for fashion’s luxury category. However, D’Auria argues that in terms of the future development of this segment, 77% of the economic profit generated by it is actually expected to decline in 2024 by 26%.

She says companies that account for 23% of luxury are expected to grow single digits at about 7% so while the segment continues to represent the majority of the super winners, there is an “interesting dynamic in terms of expected further decline in economic profit” that we’re seeing in 2024 and beyond.

She’s also keen to highlight the big challenger brands and sportswear brands, for example, Canadian athleisure brand Lululemon which is 11th on the super winners list. D’Auria also points out Deckers Outdoor has climbed nine places on the super winner’s list to be in 13th place and it is the parent company of performance lifestyle footwear brand Hoka.

The specialty retailers have been rising through the ranks over the years with the likes of Dick’s Sporting Goods and off-price stores Ross and TJX both in the top 20.

There does continue to be a high concentration of economic profit within the super winner’s list, but D’Auria points out: “The economic profit polarisation is the lowest we have seen in the last few years, or at least since we have been tracking this.” 

McKinsey & Company partner Felix Rölkens, who leads McKinsey’s apparel, fashion, and luxury sector in Europe, the Middle East, and Africa (EMEA) is quick to add the sentiment in 2024 is one of extreme uncertainty.

He explains that when fashion executives were asked about their sentiment in 2023 ahead of 2024 they were unclear on where the sector was going to go and where 2024 would bring them.

He adds: “The reservations were to some degree justified. We’ve seen that in the non-luxury market, there was hardly any growth over the last year across the major geographies.”

He reports that volume-wise, the non-luxury market is stagnant or slightly declining and there’s not a great booming market at the moment. 

On the other hand, he says if you look at luxury, we saw an even starker contrast to the years before as there was a clear deceleration and in markets like China there was even a negative evolution compared to 2023.

In the case of China he says this was partially driven by travel picking up again. Overall, he suggests the luxury market came to a cool down versus the years before, where it had still driven significant growth year over year. 

He points out: “You might be surprised to see that both in 2023 and then also expected for 2024 the economic profit still increased. Why is that? The economic profit is ultimately the surplus of the value creation that companies create over their cost of capital and while growth has been stagnant, profitability has been in focus for fashion companies.

“As a result they have severely and significantly focused on managing their operating costs, managing their cost of goods sold, and doubling down on spending and spending budgets to make sure that in this uncertain environment, they deliver, still very good results.”

He admits that in previous years this dynamic has been driven very much by the luxury market. Interestingly, he notes that in 2021 to 2022, everything that was non-luxury was diluting the overall economic profit of the industry.

In 2022 to 2023, luxury had started to shrink, but he adds that the fashion segment really picked up and in 2023 to 2024, we expected to see a reversion in the dynamic for the first time.

He continues: “Also, for the first time in over a decade luxury is actually dropping some of its economic profit contribution and diluting the overall industry’s economic profit.

“That doesn’t mean luxury is not still contributing in absolute terms a significant amount of the overall value equation, but it is actually, for the first time, watering down the share of what it contributes in terms of economic profit. 

The mid-fashion market category has significantly stepped up between 2023 and 2024 in terms of its value contribution to the overall economic profit.

Rölkens says: “Now one might ask, as always, when people talk about the mid market, is this Inditex that is driving this and is this the Inditex effect?

“Now we looked at that, and we saw that it’s not purely Inditex as even without Inditex it’s a very strong effect between 2023 and 2024 and there’s other companies in there that are also contributing significantly.” 

He argues that on the one hand this could be a “bit of a survivor bias” as the players that have struggled have exited the market, especially over the last year, when capital costs increased.

He shares it’s also been due to some of the turnarounds in the mid-market and value segment that have been quite successful.

He concludes that as 2024 draws to a close we’ve seen overall flat volumes, but still “very good profitability,” and “the industry as a whole is starting to reshape in terms of who’s winning and who’s losing”. 

Indeed, according to Dr Keshav Kranthi, ICAC’s chief scientist, such verification and regulation “can be challenging in Asia and Africa because the crop is primarily grown by smallholder farmers”. Globally, smallholders account for more than 99% of production, he stresses.

US Cotton Trust Protocol, which is a voluntary sustainability programme and traceability platform, says the proposed EU green claims directive, which ensures that companies substantiate their claims, will also “have a significant impact” in 2025. It offers quantifiable measurements across six key sustainability metrics:

• Water use 
• Energy efficiency 
• Land use 
• Soil health 
• Soil carbon  
• Greenhouse gas emissions.  

The current demands are “pushing brands and retailers to rethink their supply chains,” it argues, adding that companies will also have to respond to “improved time to market efficiencies.” It adds that to build a “more resilient and responsible cotton industry (…) collaborative partnerships will be essential.”

Trade policy changes

Lu explains today’s fashion business is highly global and relies heavily on the frequent movement of goods and services across borders. Thus, the uncertain and protectionist nature of US trade policy during Trump’s second term could present significant challenges to the fashion industry in 2025.

“Notably, when the 7.5% Section 301 tariff was imposed on selected Chinese clothing products in 2018, the US Consumer Price Index (CPI) growth was relatively low at 1.9%. However, imposing a 20% global tariff, a 60% tariff on Chinese products, and the existing 15-30% regular tariff on clothing when the CPI is historically high is like “adding fuel to the fire,” he says.

While Crietee worries the power imbalance in the apparel supply chain will mean the biggest burden will be placed on manufacturers.

However, Randy Carr, president and CEO of emblem and patch manufacturer World Emblem, believes we will see more nearshoring come into fruition in 2025, noting there are many advantages for brands looking to nearshore operations, specifically faster turnaround times, better quality control, and overall cost savings.

“By relocating production to neighboring countries like Mexico, businesses can reduce transportation costs, shorten lead times, and gain greater oversight of manufacturing processes. Nearshoring has the potential to boost the growth of Mexican manufacturing exports to the US from $455bn today to an estimated $609bn in the next five years, according to Morgan Stanley Research,” he says.

On the other hand, Accenture’s CEO Matt Jeffers states it is important to remember nearshoring will put further pressure on price points and take time to take effect especially in new countries such as those in North Africa.

Lamar sees knowledge and partnership as being key. Companies will need to foster greater collaboration with their supply chain partners as they will be responsible for managing diligence and diverse sourcing programmes.

“Fast changing and comprehensive regulations and an uncertain tariff future (including the likelihood that new US tariffs trigger retaliatory tariffs), will mean supply chain partners need to be increasingly connected with each other and with appropriate government officials so they can both inform those policies while they are being crafted and respond to new policies that take effect.

“Winners in 2025 and beyond will be those who are ready to embrace the challenges, and who can do so while staying focused on delivering to their competitive advantage, whatever that may be,” he shares.