ECONOMY

Greece’s clothing industry fights to remain afloat

Like other Western markets, the Greek clothing industry has been intensely affected by the influx of cheap imports from Asian countries, mainly China, but also by the increased strength of foreign designer clothes. Domestic production fell for two years in a row, 5.2 percent in 2004 and 14.8 percent in 2005. The decline was spurred by the abolition of import quotas from China to the European Union on January 1, 2005. Some restrictions were reinstated around the middle of 2005, for two years, easing the pressure on local textile and clothing manufacturers. Nevertheless, industry sources claim that employment has fallen about 8 percent. Foreign groups seeking opportunities of strategic expansion describe the Greek market as attractive. Though Greek consumers have seen their disposable incomes dwindle in recent years, they continue to spend more of their income on clothes than other Europeans. The increasingly strong presence of foreign groups in both designer and cheap brand names, parallel with the marketing of clothing and footwear items by large supermarket chains, is intensifying the competition for Greek manufacturers. Another dimension affecting retail trade is that department stores carrying Greek and foreign brands are threatening the viability of small merchants. The degree of concentration in the Greek clothing industry seems to be holding steady over time, with the largest 20 firms accounting for a combined share of around 55 percent. The combined turnover of a sample of 141 clothing manufacturers rose 2.1 percent in 2005 (5.3 percent in 2004) to 709.08 million euros. However, only one in two firms reported higher revenues and the average rise per firm was negative (-0.2 percent for the two years and -2.2 for the 2003-2005 period). Average annual profitability per firm deteriorated from -4.1 percent in 2003-2005 to -13.3 percent in 2004-2005, the total reaching 25.43 million euros at the end of the period. Most firms (81 percent) reported profits in 2005 but only 42 (30 percent) of the sample saw an improvement from 2004, with 63 reporting a drop. Of the 27 loss-makers, about half reported a deterioration. Gross profit margins remained at high levels (26.6 percent) but operating and net profitability declined 7.9 percent and 2 percent respectively. As a result return on equity (ROE) of Greek clothing firms dropped from 10.7 percent in 2004 to 8.2 percent in 2005.