The Italian footwear sector had a first half of the year with falling turnover (-9.1%) and exports (down -8.5% in value and -6.8% in volume in the first five months). The Istat index of industrial production also fell sharply (-19.5%). This is the snapshot for the sector provided by the latest report by the Confindustria Accessori Moda Research Centre for Assocalzaturifici, which also reveals lower purchases by Italian households (- 2.1% in both volume and expenditure).

According to Assocalzaturifici Chair Giovanna Ceolini: “The phase of weak demand, compounded by a lower consumer propensity to purchase, a slowdown in several economies (not only China) and uncertainty resulting from the geopolitical turmoil in different parts of the world, has significantly affected orders, including in the luxury segment. The economic downturn is having a strong impact on the production trends of companies, which have increased their use of wage support. There was also an increase in the negative balances in the number of employees and companies trading compared to December 2023”.

The most significant effects occurred in foreign trade. "Exports have been affected most significantly,” states Ceolini, “despite traditionally representing the sector's driving force, since 85% of the shoes produced in Italy are sold outside the country. The balance of trade for the sector still shows a surplus of EUR 2.34 billion, but this drop in foreign sales (-8.5%) represents a decrease of -4.7%, and comes despite a concurrent reduction in imports (-11.6%)”.

Examining the export data in detail, the slight reductions in sales to fellow EU members (-1.6% in value and -2.4% in volume, boosted by steady flows to France, +2.6% in value and +1.5% in volume, which confirmed its status as the leading destination market) occurred alongside reductions in the order of -15% to non-EU markets. Of these, the only increases in sales were recorded in the Middle East (+10.7% in value) and Far East (+2.9%, with China +12.6% and Hong Kong +22.6%). However, these are to be interpreted mainly through the lens of changing distribution strategies for luxury brands that are strongly rooted in these areas and now ship directly to final destination markets, rather than have goods transit through hubs in Switzerland (which therefore sees a corresponding -54.7% slump in value). The USA dropped -3.5% in value (and a much more pronounced -14.7% in volume), while, following the collapse in 2022 at the start of the conflict with Ukraine and the sharp recovery in 2023, Russia experienced a -21.7% drop in value over the period January-May 2023.

Even in terms of domestic consumption in Italy, the figures are not positive: in the first six months of the year, Italian households' purchases fell by -2.1%, in both volume and expenditure. Shifting the analysis to types of footwear, the biggest decreases were for men's shoes (-5.7% in volume and -4.6% in expenditure), while women's and children's shoes showed decreases in the order of -3%, in both volume and in value. “Sport shoes and sneakers” had the most limited reductions (-1% in volume and -0.6% in value). Finally, slippers dropped by 1.7% in volume (despite women's slippers holding up), with a -0.7% drop in expenditure. While household purchases show little positive development, there is once again good news from the shopping of foreigners visiting Italy, thanks to the increase in foreign tourist arrivals and stays in the country, after the strong growth in 2023.

On the labour front, the prolonged economic downturn is severely testing the resilience of companies, which are forced to make extensive use of wage support instruments. Indeed, in the leather sector, the number of authorised hours increased by +138.5% in the first 6 months, and is now 4.5 times higher than it was during the same period in 2019, before the pandemic. Moreover, the selection process among companies is even more pronounced, with inevitable repercussions on employment trends. At the end of June, there were 107 fewer shoe factories, across industry and handicrafts (-3%) compared to December, with a negative balance of -2,359 employees (-3.2%): this represents a sharp reversal from the timid signs of recovery seen in the sector's workforce at the end of 2023 over 2022 (+1.8%).

In terns of sentiment, the expectations of footwear businesses for the second half of the year appear to rule out major improvements in the short term. The survey of member companies shows that the share of respondents expecting turnover to fall in Q3 - compared to the same months in 2023 - still represents the majority (56% of the panel). And with regard to forecasts for the whole year, 3 out of 4 businesses believe that 2024 will be a worse year for their company than 2023.

Milan March 8, 2024 - Sustainability, digitalization, innovation, Made in Italy, and tertiary as drivers for the development of the sector, with a focus on training to make footwear an attractive sector for young people. These are the guidelines until June 2027, of Giovanna Ceolini, who was confirmed as President of Assocalzaturifici by the Assembly of members that met yesterday.

With more than 450 member companies, the Association, nationally represents companies of an industrial nature operating in the footwear manufacturing sector.

"It is indeed with great emotion," Ceolini comments, "that I face this mandate of mine. We have a challenging job ahead of us. We have to respond to a conjuncture that is not easy, in a geopolitical framework dominated by uncertainty, with initiatives and projects that support our companies in international markets. Today, more than ever, it is important to put the interests of the industry, and therefore our Association, back at the center. We can do this by returning to frank and constructive dialogue and confrontation. In this I will not be alone, but supported by a team composed of professionals of undoubted value." Joining the President were Giuseppe Baiardo, Vice President for Training and Orientation, Luisa Benigno, Vice President for Business Culture and Productive Strategies, Giuseppe Camerlengo Vice President for International Affairs, and Valentino Fenni Vice President for Russia, C.S.I. Area and Made in Italy.

Ceolini, highlighted the most salient aspects of her program, from internationalization, to the promotion of Made in Italy footwear in the world, consolidating mature markets and seeking new opportunities in emerging ones, to the collaboration with the main technical institutes and professional schools to encourage generational turnover. Other objectives include the enhancement of third-party companies, better known as CDMOs (contract development and manufacturing organizations), to defend the traditional craftsmanship of Italian manufacturing. Profuse support is also given to trade fair policies starting with MICAM Milan, the world's most important event in the sector. Among the projects in the pipeline are the reorganization of the pavilions, the strengthening of the MICAMX area, with a focus on seminar content, the section dedicated to the retail of the future, communication and events. There will be no shortage of consolidation of CIMAC, a laboratory specializing in testing for the footwear and fashion industry, which ensures product quality and excellence and compliance with global standards. In fact a support to companies, in an increasingly complex regulatory framework, through testing and certification services. And then, development of VCS - Verified and Certified Steps, the first sustainability certification mark for the footwear industry. A scheme that sensitizes companies to the adoption of a comprehensive sustainability strategy by working on internal processes, supply chain traceability, information collection and organization with a system of procedures for improvement and advancement against the most widespread international sustainability parameters and standards.

Italy’s footwear sector grew moderately in the first nine months of 2023, registering an increase in both turnover (+3% according to a survey of a sample of members) and exports by value (+3.2%) compared to the same period in the previous year. This is the snapshot provided by the Confindustria Moda Research Centre for Assocalzaturifici, which however reveals a drop in the volume of sales. After bouncing back in the previous two years, the number of pairs sold abroad began to fall once again (-8.7% on January-September 2022), as did sales on the Italian market (-3.1%), with the ISTAT index of industrial production down by -7.4%. The setback in the third quarter weighed heavily on results, closing with -7.2% in foreign sales in terms of value (-12.3% in terms of quantity) and -1.5% in household spending within Italy.

According to Giovanna Ceolini, Chair of Assocalzaturifici, "After a very positive start, 2023 closed with a downward slide, partly due to major increases in costs affecting companies’ profit margins. Once the post-Covid rebound was over, the pace of sales slowed markedly, beginning as early as the Spring and becoming even more obvious in the third quarter of the year. This widely expected trend was definitely not facilitated by the uncertainty of the difficult international geopolitical scenario, when, in addition to the war between Russia and Ukraine, events in the Middle East came to a head, with a real risk of the conflict spreading, in addition to the weakness of the economy in several important areas of the world.”

The report shows how, among the main foreign markets, EU markets performed best overall, growing 8.5% in value despite a -6.1% drop in volume over January-September 2022, while non-EU destinations showed an even heavier setback in terms of quantity (-13.4%), accompanied by a negative sign in value (-1.2%).
Alongside the resilience of France (+1% in volume and +17.1% in value), there was a strong contraction (-32.4% in pairs and -22.5% in value) in flows to Switzerland, traditionally a logistics hub for the fashion multinationals (which have, at least to some extent, replaced transit through Swiss warehouses with direct shipments to their final destination markets). Sales declined significantly in the third quarter (with a drop of more than -20%) in the USA (which registered a decline of -21.7% in terms of quantity and -7.4% in terms of value in the first nine months) and in Germany (-16.6% in number of pairs, though stable in value). Sales in China continued to perform well (+17.2% in volume and +12.2% in value), despite a downturn in value in the third quarter (though the average price per pair, above 200 euro, remains by far the highest). Russia and Ukraine continued to recover (+40% and +88% in value respectively over January-September 2022), although sales in these two markets still remain below pre-war levels.

On the domestic front, moreover, while 2023 saw increased tourism, with positive repercussions on shopping by foreign visitors to Italy, footwear purchases by Italian households showed a lacklustre trend, closing the first nine months with negative signs (both in pairs, -3.1%, and in expenditure, -1.3%) compared to the same period in 2022 and, above all, about 5% below the pre-pandemic levels of 2019, already largely unsatisfactory after years of continuous erosion. The abnormally warm weather of autumn, with almost spring-like temperatures, discouraged purchases of winter clothing and shoes.

Finally, the process of natural selection among companies has not ceased (-148 companies, between industry and crafts, in the first nine months, i.e. -3.9%), despite the fact that employment is holding up (+2.1%, although still about a thousand employees below 2019 levels). Increased use of wage support in the leather industry (+6.1%) is, however, a discouraging sign.

Assocalzaturifici Chair Ceolini, took the opportunity offered by the presentation of the figures on performance of the footwear sector to discuss the final approval of the “Made in Italy” bill and the 2024 Budget: "I am satisfied with these measures, which provide for the enhancement and promotion of strategic assets for relaunching the economy and employment in the country, such as protection of supply chains through the “Made in Italy” sovereign fund and support for international trade fairs. I see these as two indispensable tools for enhancing the value of our country's manufacturing SMEs and boosting their competitiveness on international markets. Like the Digital Transition Fund, which in our case is also relevant considering the commitment and leading role of Assocalzaturifici in environmental certification through the VCS mark. I also approve the increase in resources allocated to fighting counterfeiting and “Italian-sounding” names, two phenomena that are detrimental to our products, and the further extension to 30 July 2024 of the deadline for submitting applications for spontaneous repayment of unduly received R&D tax credits. The latter is a thorny issue that is becoming unsustainable for our companies. It is necessary to ensure that the implementing decree for the creation of the registers of accredited certifiers is approved as soon as possible, in order to clearly define what is really to be included in research and development. This is the only solution to protect those who have complied with the rules.”

The first quarter of 2023 saw the recovery of the Italian footwear sector continue, with turnover up +13.6% compared to the same period in the previous year. This is the snapshot provided by the Confindustria Moda Research Centre for Assocalzaturifici, which also shows an improvement in the balance of trade (+21%).

“After yet another record being broken with the final balance for exports in 2022 (12.65 billion euro, +23% over 2021), the growth in exports continued, with a further +16.1% increase in value,” explains Giovanna Ceolini, Chair of Assocalzaturifici. “In particular, all the top 20 international destinations for Italian footwear, with the sole exception of Switzerland (-7.8%), saw increases in value, that were almost always in double-digit territory. However, the situation is different for volumes, as North America slowed down noticeably (-19.4%) and decreases were seen in Germany (-8.8%), the United Kingdom (-10.1%) and in direct flows to Switzerland (-24.8%), the traditional logistics hub for luxury brands. There was a strong recovery in Russia and Ukraine, although it should be noted that in March last year, immediately after the start of the conflict, sales to these two markets had plummeted; the results for Kazakhstan (+77% in value) were very positive. The recovery in the domestic market also continued (+8.2% in household purchases over Q1 2022)”.

However, despite the favourable trends for the main economic variables, there is still cause for concern. Indeed, there are several signs of a slowdown in growth (which is to an extent natural), after the V-shaped recovery in 2021 and the further consolidation in 2022. Despite a somewhat uneven trend across companies, this recovery allowed the sector as a whole to return to pre-Covid revenue levels in 2019. Companies' forecasts for revenues for the second quarter onwards remain positive, but appear to be cooling progressively; in terms of volume the slowdown is even more evident, with some decreases already emerging compared to Q1 2022. In the first 3 months of the year export volumes shrunk slightly (-2%) as did production (-1%, according to ISTAT’s index of industrial production).

“The survey conducted by the Confindustria Moda Research Centre amongst our members,” - notes Giovanna Ceolini, - “also revealed that high prices for energy and raw materials are currently the biggest problem for footwear companies, due to their impact on balance sheets. The survey responses also confirmed the tightening of banking credit in recent months as reported by the Bank of Italy and Istat: as much as 39% of the sample reported further restrictions (with this figure rising to 51% when we exclude companies who do not currently use credit facilities). Finally, the analysis confirmed once again the sector’s difficulties in finding skilled labour - with 84% of entrepreneurs identifying this as a significant problem for their businesses."

The report also shows that the selection process among companies is still ongoing (with -107 less active businesses compared to December, i.e. -2.8%), while the number of employees remains fairly stable (-0.3%). After the exceptional peak during the pandemic, the number of authorised wage support hours in the leather sector fell again (-20.4% in the first five months), despite a reversal of this trend in April-May (+12.6%): there were 5.7 million hours authorised overall, still +76.2% higher than in the first 5 months of 2019, before Covid.

Returning to exports, the breakdown by product type reveals uneven trends. The leather uppers footwear segment - the leading segment, which accounts for 63% of the value of exports - is the only one to have increased in the first quarter both in value terms (slightly above the average, +18.6%) and volume (+1.4%) compared to the same period in 2022; nevertheless, volumes are still down markedly compared to 2019 (-16.6%). Among the segment's items, there was a significant reduction for children's leather footwear (-12% in volume), brining to an end the recovery over the last two years; there were positive signs for the “men's” (+4.7% in total volume, despite the decrease in “high boots”) and “women's” segments (+1.5% in volume, with +2.2% and +4.2% increases for walking shoes and sandals respectively and a -24.5% reduction for boots/ankle boots).

In terms of export performance across different production regions, when analysing the data, consideration should be given to distortions resulting from potential discrepancies between the manufacturing province/region and the place where export goods are actually dispatched from. Strong export growth in some provinces is attributable to logistics hubs, which are often linked to online sales, or storage facilities for luxury brand multinationals. This helps explain the performance of Milan, which increased by +64% in the first quarter to become the leading exporting province in the sector after overtaking Florence (-11%). Looking in detail at the destination markets of these two territories, however, we note the marked increase in flows from Milan to Switzerland, which were up by +251%, i.e. 103 million euro compared to Q1 2022: this is roughly equivalent to the reduction recorded by the province of Florence in flows towards the same country (-99.8 million euro, i.e. -28% from Q1 2022). These variations are related purely to changes in distribution dynamics, and are not attributable to the economic situations in the respective areas.

As a result of these changes, Lombardy (with its +49.5% jump) overtook Tuscany (-6%) in the regional export ranking, rising to second place behind Veneto for the period, with the latter seeing an increase of +12.6%. With the exception of Tuscany and Puglia (which remained stable, -0.2%), all the other main footwear areas saw double-digit increases; Marche's growth of +20.3% (with similar trends for Fermo, +23.3%, and Macerata, +21.8%, and more moderate rises for Ascoli, +13.6%), means it is now 4% above pre-Covid levels in Q1 2019. Conversely, despite a +22.2% increase, Campania is the only region that remains below pre-Covid levels (-3.8%). Returning to the figures for Tuscany, it should be noted that, net of flows to Switzerland, exports would actually have recorded a double-digit increase (+14.3%). This is in line with the national average and means there are no particular criticalities compared to other areas.

The Italian footwear sector continues its post-pandemic recovery path, recording in the first nine months of 2022, compared to the same period of the previous year, a double-digit increase in turnover (+13.9% among the companies in the sample of Associates). This is the snapshot taken by the Confindustria Moda Study Centre for Assocalzaturifici which also highlights an increase in exports (+23.7% in value and +11.7% in volume, driven by luxury brands), which has already exceeded pre-Covid levels (with the exception, however, of shoes with leather uppers, which have a -11% gap in quantity compared to 2019). Rewarding results in the Community markets (with increases in the order of +25% in value in France and Germany), in North America (+62%) and in the Middle East (+58.5%). So far, China has also done well, but above all for the top of the range (+43% in value, with +34% in the average price). The consequences of the war in Russia and Ukraine are heavy (-32% in the first 9 months overall, with -40% since the beginning of the conflict); Kazakhstan is growing among the states of the former Soviet bloc (+33.4%).

According to Giovanna Ceolini, President of Assocalzaturifici: “Despite the double-digit increase in sector turnover in 2022, with a forecast of a return to pre-pandemic levels, and the positive signs of most variables, a sharp increase in costs is eroding company margins, forced to face, in addition to the increases in the prices of raw materials, the unprecedented rise in energy costs. There is also a significant lack of homogeneity among the companies, with 2 out of 5 still having turnover below pre-crisis levels. The effects of the crisis appear evident in the data relating to the demographics of businesses (with 180 closures among footwear manufacturers since the beginning of the year, between industry and crafts, -4.5%), while in employment levels are confirmed the rebound already recorded in the first two quarters (+2.3%, insufficient, however, to cover the losses suffered in the previous two years) and the marked reduction, compared to 2021, in the hours of redundancy fund authorised in the leather area (-81.6%, with still a +80% on 2019). Uncertainty dominates short-term expectations, in a global panorama in which – after the long period scourged by the pandemic – inflation, high bills, and geopolitical turmoil are undermining the climate of confidence, curbing the demand for goods”.

The report also shows the recovery in domestic consumption: +13.3% in spending on household purchases, but still -3.5% on the already largely unsatisfactory situation of three years ago. The simultaneous leap in imports (+30% in quantity) and the propensity to save induced by the high cost of living make competition on the national market increasingly tight, also disadvantaged by an autumn season that started very late. The share of off-price sales is growing. In the summer, a sustained pace of tourism has returned, but the recovery in foreign shopping is still only partial.

Analysing exports in detail, foreign footwear sales (pure marketing operations included) reached yet another record in value, reaching 9.35 billion euros (+23.7% on January-September 2021), for a total of 165.2 million pairs (+11.7%): not a record for quantities, but still the best result from 2017 to today. The average price per pair rose to 56.60 euros (+10.7%). Both in value and in volume, the figures of the first 9 months of 2019 pre-Covid were exceeded (+20.4% and a more modest +3.9% respectively).

Exports to the USA were decidedly positive which - after the end of the “customs war” with the EU in autumn 2021 in the context of the digital tax disputes and the narrow escape of additional taxes on fashion products – in 2022, thanks to favourable exchange rates, they recorded a significant increase in the first 9 months (+61% in value and +28% in volume). Equally vigorous growth can be seen in Canada.

China, after the slowdown in the April-May two-month period (-25% in quantities and -13% in value) linked to the restrictions adopted in various cities to deal with new Covid outbreaks, has restarted vigorously since June. The third quarter recorded an increase of +86% in value (with +17.4% in volume), thanks to the results achieved by luxury brands. The cumulative pattern for the first 9 months thus marks a +43% in value, with a much smaller +7% in number of pairs sold. In the top 20 destinations, it is the market with the highest average price: 213.39 euros/pair, +33.6% over a year ago.

Obviously, the news of recent days of the resurgence of the virus, after the new dramatic wave of cases in the country, is of great concern.

Remaining in the Far East, (+27.4% in value globally) South Korea returns to growth (+22.5%) after the 2021 setback which had interrupted the long positive streak of the previous decade; Japan did well (+25.5% in value), which however, like Hong Kong, has a considerable gap with the pre-pandemic period.

The data on the Middle East is also comforting, where the United Arab Emirates stand out (15th market, up by +68% in value and +49% in quantity compared to January-September 2021).

Returning to the Old Continent, among the members of the EU27, Germany grew by 26% (+18% in pairs), which has always been one of the main consumers of ‘Made in Italy’ footwear (it is the second in terms of volume); other important EU outlets are also positive, such as Spain (+23% approximately in value), the Netherlands (+36%), Poland (+16%), and Belgium (+19%), all already well above pre-Covid numbers. Exports to the United Kingdom are coming back (+23% in value and +1.6% in quantity) after the collapse of the last two years, following the exit from the Union. However, the current figures remain markedly lower than those of 2019: -29% in value and -39% in volume.

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MIPEL 127
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