After 109 days, the end of the war between the United States and Iran is finally in sight. On the night of June 17th to 18th, a preliminary peace agreement was signed in Switzerland. The Strait of Hormuz has reopened. Nevertheless, Dutch bank ABN Amro warns in a new sector forecast that the crisis is not over. Possible ‘second-round effects’ could cost retailers dearly.
Sector forecast
ABN Amro has revised down its retail growth forecast for 2026 to 0.5 percent. Growth of one percent is expected for the coming year. The reason for this is the lasting consequences of the geopolitical conflict. As long as inflation continues to rise, household purchasing power will continue to decline in the second half of the year, according to the bank’s forecast.
Although consumers will continue to spend thanks to savings and a tight labor market, confidence has fallen sharply. Due to inflation and global unrest, it fell from minus 23 in January to minus 46 in May. Non-essential expenses, such as a new pair of shoes or clothing, are the first to be eliminated.
At the same time, costs at the back end of the supply chain are rising. Clothing and shoe stores are labor-intensive industries. They spend 18.0 and 18.2 percent of their sales on staff and are therefore sensitive to wage increases. The industry is also vulnerable to delivery problems. The Netherlands imports 47 percent of the clothing available on the market from eight Asian countries. China and Vietnam top the list for clothing and shoes respectively. In these countries, suppliers are struggling with electricity shortages and high energy prices.
Ultimately, rapidly rising interest rates are making storage more expensive. This is a problem for wholesale and certain segments of retail. Maintaining inventory requires additional liquidity. This leads to tension, especially at a time of uncertain delivery times. Apparel companies want to have enough product in stock to mitigate supply risks, but they pay a high price for it.
Supply chain crisis
Last Wednesday, the industry association Modint reported members’ first negative experiences as a result of the war. The negative signals are in line with the tenor of the sector report.
Spokeswoman Miriam Geelhoed summarized the problems for FashionUnited: “Transportation costs have risen sharply. Fuel surcharges and sea freight rates are rising rapidly due to cargo ship diversions and uncertainty on trade routes. Raw material prices are volatile. This is particularly true for materials derived from petroleum, such as polyurethane, nitrile and polyester. Additionally, additional fees often apply and these materials are currently difficult to obtain. The conflict is putting logistical planning under pressure. Especially companies that sell their goods sourcing from Asia, working with large quantities or dependent on tight seasonal planning are severely affected by this.”
The coming weeks will show how quickly the industry recovers. It remains to be seen whether she can carry on ‘as usual’ again. It will also become clear how much the second-round effects of the conflict will put a strain on entrepreneurs’ margins.
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