Apparel / Textiles & Accessories

With the release of the 2021 semi-annual report, several listed apparel companies are happy and sad, and the "difficult situation" of some apparel companies is at a glance, and the "inventory crisis" that has plagued the development of the industry for a long time is still spreading.

613 million fabric inventory, 1.582 billion clothing inventory

Well-known clothing brands encounter performance Waterloo

On the evening of July 15th, Souyute Group Co., Ltd. issued an announcement on the performance revision for the first half of 2021. It is estimated that the net profit attributable to shareholders of listed companies for the first half of the year will be between -13.5 billion and 900 million yuan, a year-on-year decrease of 2703.88% to 4005.82%. , From profit to loss; earnings per share are -0.4400 to -0.2900 yuan.

As for the reasons for the performance changes, Sou Yute explained: First, due to the impact of the epidemic, the company's supply chain business and brand apparel business sales revenue and gross profit were less than expected, resulting in a decline in profits; second, the company's liquidity was tight, as of June 2021 On 30th, the company has overdue debts and several litigation and arbitrations. In order to repay interest, pay suppliers’ payment for goods, storage lease fees, wages and other production and operating expenses, the company intends to dispose of raw materials with a book balance of 613 million yuan. The clothing inventory of class and 1.582 billion yuan further carried out large-scale price reduction promotion on the original basis, and quickly returned funds. Therefore, it is expected to increase the inventory price reduction reserves of 1.0-11.5 billion yuan.

For apparel companies, inventory is always one of their main pain points. The product backlog not only occupies the company’s operating capital, but also increases the company’s management and profit costs, lengthens the product’s turnover cycle, and reduces the company’s overall profit. As for the huge inventory, closing down poorly managed stores, discounts and promotions have become the traditional practice of most clothing companies to destock. An executive of a service company who did not want to be named said frankly: "At present, it takes a long time for apparel companies to digest these inventory, but the sales inventory still needs profit support. When the financial statements are ugly, the bank will follow suit to collect debts. Therefore, More and more apparel companies are entering the vicious circle of inventory."

Long-term industry inventory backlog

It is a catastrophe for the brand itself and the market

Due to the prolonged inventory turnover days, companies have to pay for warehousing costs and manpower management costs, which will increase operating costs during periods of declining profits. At the same time, cash flow is also under pressure, capital is difficult to recover, and the survival of the company is facing a crisis.

Textiles and clothing are mutually dependent industries, and the terminal stock is not sold in time, which will directly affect the development of the textile industry. Fabric manufacturers lack large orders in batches, and weaving factories are slow to deliver goods, and grey fabric stocks follow. Further down, the continuous value of raw materials has fallen, causing pressure on the production of raw materials.

It is understood that the total export of textiles and clothing from January to May this year was about 96.2 billion U.S. dollars, a year-on-year decrease of 3.44%. Among them, textile yarns, fabrics and products have achieved a high growth of 77.34% year-on-year in May, mainly due to the domestic epidemic since March. Under effective control, domestic textile enterprises have basically resumed work, and export orders have been completed and exported before the Spring Festival. The increase in the export of epidemic prevention products (masks, etc.) has driven the high growth of textile exports. However, due to the serious overseas epidemic situation, weak consumer demand for foreign clothing, and many offline stores of international brands closed, clothing and clothing accessories fell -26.93% year-on-year.

The textile market is not as good as imagined

A large number of market orders are hoarding, fearing that the future market demand will be overdrawn!

From the perspective of the recent textile fabric trade, although orders are increasing, according to feedback from many market personnel, the current orders are mainly "spot market orders". This part of the order is large in number and will create a short period of time for the market. An unusually busy scene, but the corresponding normal orders are currently flat. Most of this part of the market has stock speculation after rising raw materials, which will also overdraft the subsequent market demand.

On the other hand, the most important point is that the sales of fabrics are not optimistic. The peak season market in the first half of this year is not as good as in previous years. Fabric orders in the off-season are even worse. Except for some autumn and winter fabrics, other products are selling well. Difficult to deliver goods. Without orders, even if the cost is high, weaving companies lack the courage to raise prices. "The price of raw materials has risen recently, but we don't dare to raise the price with our old customers because we have no orders, and we are afraid that customers will all run away." A person in charge of a weaving company introduced. The domestic epidemic has basically ended this year, but the textile foreign trade market does not seem to improve. Repeated epidemics overseas, ocean freight, international relations, and superimposed on the excessive inventory of textiles and clothing last year have led to the trembling of foreign trade orders.

For those apparel companies with poor product competitiveness and poor differentiation capabilities, the onset of inventory pressure may be a severe test. In the future, if inventory factors cannot be effectively alleviated, apparel companies that collapse with inventory may drag on. Downfall traders and weaving companies. Regardless of the situation, in short, inventory digestion has a long way to go, and it is still the primary task of the current textile industry chain.