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MARKET OUTLOOK
Sustainability key to future
of clothing companies
When Thomas Gustafsson and Sven Knutsson, both Deputy CEOs at
Mellby Gård, analyze the Group’s ready-to-wear clothing companies,
they point out three general trends: The Group’s omni-strategy has been
successful, runaway costs have necessitated significant price increases
and sustainability is crucial to the future of the industry.
By the end of 2021, the pandemic seemed to be over and many
people predicted a more normal 2022.
“We breathed a sigh of relief after the pandemic, which
wasn’t nearly as bad for us as we’d feared,” says Thomas Gustafsson.
“On the contrary.” For the first two months of 2022, the feeling of
positivity from the end of 2021 prevailed, after which the terrible war Mellby Gård and the Group continuously works with pricing as a tool.
in Ukraine struck.
“If we look specifically at the performance of our two ready-to-wear
clothing companies, Kappahl and Oscar Jacobson, over the last three
years, it has clearly emerged how demand and trading patterns differ
between the companies,” Thomas Gustafsson continues. “During the
pandemic, customers stopped shopping in stores, leading to a rapid
and dramatic drop in sales. Where Kappahl was concerned, sales
rose again very quickly thanks to e-commerce, which doubled. But for
Oscar Jacobson, recovery was slow.”
“In hindsight, this was a logical development,” Thomas Gustafsson
argues. “People weren’t allowed to be in the workplace; instead
they worked from home in clothes they usually lounged around in.
They weren’t allowed to go to pubs, organize major birthday parties,
weddings, etc. So there was no need for Oscar Jacobson’s products. On
the other hand, Kappahl’s basic offering was much sought after, and at
one point, sweatpants were Kappahl’s best-selling men’s garment.”
“Oscar Jacobson came back with a vengeance in 2022 and the
company enjoyed a record year,” says Sven Knutsson. “The
underlying trend then headed in the opposite direction. Offices
were open, weddings and 50th birthday parties could be organized,
conference facilities and hotels were fully booked. Consumers once
again needed to buy a new suit, or other office or party wear. Based
on what we’re seeing in terms of bookings at hotels and major events,
demand for Oscar Jacobson’s products looks set to remain high in
the first half of 2023.”
COMPENSATION FOR COST INCREASES
2022 has been characterized by large cost increases for virtually all
inputs. During the year, there have been many discussions within the
Group about price increases to compensate for costs. “How much can
we raise them by? What’s the competition doing?” Pricing is key for
“In general, the companies have managed the price increases very
well,” says Thomas Gustafsson. “Our long-term belief is that cost
increases will gradually abate, which is why it’s important for us to
compensate over time so we can pick up the gross margin later. There
has been some concern in a few of the companies about raising
prices too aggressively, and we’ve played an important role in helping
ensure that their reasoning is constructive in this regard.”
“There’s a big difference between companies able to compensate
themselves with a more or less general percentage increase, as many
of our industrial companies have done, and companies like Kappahl
and Oscar Jacobson, which have to work product by product to
ultimately achieve the same overall effect,” says Sven Knutsson.
“There’s a specific pricing mechanism in the clothing industry that
uses what are known as price points, with companies really having
to fine-tune their prices,” he explains. “Let’s say a garment costs SEK
299 and you want to increase it to 329, but there’s no price point. The
price must then either be left unchanged or be raised to the closest
price point, which in this case is 349. We’ve worked our way through
the ranges like this, garment by garment – a huge task that overall
meant that we were more or less able to compensate for the cost
increases we were affected by.”
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