Have you ever walked past a shop window in mid-July and seen a rail of winter coats and other garments shoved into the corner, next to fashion accessories that seemingly no one wanted? If so, congratulations, you’ve already witnessed the quiet, awkward truth of the fashion industry.

“The fashion industry doesn’t sell clothes, it sells a moment.”

And let’s be slightly blunt here, when that precise moment passes, the fabric, however well made, however desirable and wearable, unfortunately loses its currency. The coat still keeps out the cold, the dress still drapes the same way, but per the commercial terms, it might as well be a sack of potatoes. That’s where accountants get involved.

Write-offs in fashion are not rare events. H&M’s 2024 accounts showed almost $4 billion in closing inventory, not a direct write-off, but the value of stock still on hand at year-end, part of which may later be discounted or impaired. Here are some statistics;

• American Eagle took a $75 million hit just on spring and summer lines this year
• Luxury giants like LVMH and Kering have been known to carry excess or impaired inventory worth between four and eight per cent of their annual sales (BoF State of Fashion 2025).
• In the UK, Burberry managed to burn through £28 million of unwanted stock in 2018 just to stop it turning up on a discount rail somewhere and chipping away at the brand’s mystique.

All of the above aren’t one-off events. They’re sadly part of the business process and design. The formal explanation, per IAS 2, is “lower of cost or net realisable value”. You hold a piece of stock at cost, the amount you paid to make or buy it, unless the price you could realistically get for it is lower. Then you write it down. In plain language: you admit, in black and white, that your dreams of selling that pastel blazer for £120 are over. Maybe you’ll flog it for £40, or perhaps you won’t sell it at all. Either way, the loss hits your profit now. Accountants don’t weep over this; they measure it, and in fashion, they measure it all the time.

The part students often find odd is that brands expect this. They even budget for it. If you’re selling milk, you might allow for a few cartons going sour before they’re bought. If you’re selling clothes, you assume a hefty chunk of your range will end up discounted, written off, or destroyed. According to McKinsey’s State of Fashion report, between 2.5 and 5 billion garments went unsold in 2023 – that’s between $70 billion and $140 billion in potential sales just… sitting there. Nearly half of retailers admit to having large surpluses, and about a quarter of that excess stock gets written off entirely every year Source Total Retail

You may wonder, why? Because predicting demand is like predicting the weather five months from now. You can look at trends, listen to forecasters, study what sold last year, but in the end, you’re still guessing.

Produce too little and you lose sales. Produce too much and you have to shift the excess. The industry almost always leans towards overproducing, because missing out on sales today feels like a bigger crime than carrying a warehouse full of mistakes tomorrow. And oddly, customers reinforce it. We expect the shelves to look full and varied every time we walk in. We expect “new in” to actually mean new.

“We rarely admit that overproduction isn’t an accident, it’s the business model. And in the deliciously perverse world of branding, sometimes the most valuable thing you can do with your product…is destroy it.“

In luxury fashion, scarcity is part of the product. If a £1,500 handbag ends up in an outlet for £500, it dents the aura of exclusivity. It’s pretty clear the aura is worth more to the company than the bag itself. Which is why, in a twist only branding could justify, they’d sooner torch it than flog it cheap. You can see why it drives campaigners mad, and why it stubbornly survives.

Smarter forecasting, AI trend analysis, and rapid on-demand production can cure this vicious cycle one day. And yes, maybe. But even with better tools, the psychology of the industry – and the customer – doesn’t change.

We want choice, we want the rush of the ‘new’, and to give us that, brands will always produce more than they can sell. Which means that somewhere, in some warehouse, there will always be a pile of unsold stock quietly losing value by the day.

When you step back from the spreadsheets, you realise these write-offs aren’t just about business. They’re about time, about the fragility of what we value. Every garment that ends up written off was once presented as essential and desirable. It was shot in perfect lighting, described in glowing copy, and priced to signal worth. Weeks later, it’s reduced to numbers on a form, an entry in an “inventory impairment” column. Fashion makes and unmakes meaning at a dizzying speed, and the write-off is just the final stage of that cycle – the formal acknowledgement that this particular dream has expired.

“Sometimes in branding, the story is worth more than the product, which is why it’s better to burn it than sell it cheap.“

It’s tempting to scold the waste. And we should, to an extent. The environmental cost is obvious. But allow me to be a bit blunt here. The write-off is essentially a reminder that our economy is built less around less on meeting needs and more on feeding desires, which, by their nature, are always fleeting and changing. In a way, aren’t the accountants the only ones telling the truth here? Everyone else, as it seems to me – marketers, merchandisers, stylists – talks about timelessness. The accountants quietly note the date it all became worthless.

If you teach business or accounting, as I do, this is one of those moments where the theory and the reality meet. On the whiteboard, IAS 2 looks neat: “Inventory is measured at the lower of cost and net realisable value.” In the real world, it’s a truck reversing up to a warehouse loading bay to take away a shipment of perfectly good clothes that no one wants anymore. Numbers and philosophy in one act. And if you can see both at once – the ledger entry and the melancholy – you’ve understood something essential about the way fashion works.