First-Step Analysis: Luxury & Fashion in Spain

Lexology | Hogan Lovells

What is the current state of the luxury fashion market in your jurisdiction?

The luxury fashion industry in Spain plays a significant role in the European and global market, but a closer look reveals that this significance must in fact be seen from three different angles: from the brand side; from the manufacturing side; and from the consumer side.

In relation to the brands, Spanish companies are among the world leaders in fast-fashion (with Inditex - of Zara fame - or Mango being the most notable Spanish players) but they are not part of the select group of the world’s luxury brands. There are a number of well-known Spanish luxury brands, such as high-end leather and fashion group Loewe (part of French luxury group LVMH), but their significance in the global retail economy is largely outweighed by that of the low-cost fashion brands that have made Spain a global player.

From the perspective of manufacturing, many Spanish companies supply goods and products to the world’s leading luxury and fashion brands or act as manufacturer for other groups. While textile confection, traditionally important in Spain, has largely moved away to other regions over the last twenty years (northern Africa, Turkey, Asia), the manufacturing of other consumer goods for international fashion and luxury brands (notably: shoes and leatherwear, as well as cosmetics and perfumery) continues to be important for the Spanish industry.

On the consumption side, Spain is of course a large and growing market, which does not go unnoticed to any important fashion or luxury brand. All the international brands are present in Spain, through their own brick-and-mortar stores, third-party multibrand retail points of sale, or direct-to-consumer online sales. They see how the Spanish customer shows potential to spend more on luxury and fashion, particularly now that a long period of economic downturn has come to an end for a large part of the population. That said, investment bankers, advisers and retail experts all agree that we can still expect a ‘shake-up’ in the Spanish retail sector, as there continues to be excess capacity, particularly in large department stores and fast-fashion franchisee networks. There is an expectation that, even after many restructurings and closures, a further reduction and rationalisation of certain retail networks will be seen in the mid-term. This is particularly true for certain retailers offering low and mid-priced products, and is less relevant for the high-end luxury and fashion sector, which is more stable in Spain overall.