Apparel / Textiles & Accessories

In the textile and apparel sector, high inventories have always been a common problem in the industry, and this indicator has also attracted attention. 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.

Apparel companies are entering a vicious circle of inventory:

The inventory of 8 listed clothing companies exceeds 1 billion yuan

According to Wind data, among the 43 textile and apparel stocks, as of the first half of this year, 39 stocks had an inventory value of more than 100 million yuan. Smith Barney Apparel, Anzheng Fashion, Soyute, Peacebird, Semir Apparel, Jihua Group, Hailan Home , Youngor's inventory of 8 shares exceeded 1 billion yuan, of which Youngor's inventory ranked first.

Youngor’s semi-annual report shows that as of the end of the reporting period, Youngor’s inventory amounted to 16.575 billion yuan, accounting for approximately 19.67% of its total assets. It is understood that Youngor's inventory classification includes material procurement, materials in transit, raw materials, turnover materials, inventory goods, products in progress, goods issued, commissioned processing materials, land to be developed, products developed, development costs, etc. Among them, the book balance of Youngor's inventory of goods is about 1.27 billion yuan, and the corresponding book value is about 1.198 billion yuan.

At the same time, according to the reporter's query of the annual reports, it was found that since the listing of Peacebird, only one year's inventory has decreased by 0.12% in 2018, and the remaining years have increased to varying degrees. The book value has continued to increase from 664 million yuan in 2011 to 2021. The 2.364 billion yuan in half a year has accounted for 27.77% of the total assets. The company mentioned in the report that the company’s inventory is still relatively large and accounts for a relatively high proportion of total assets. Changes in the market environment or increased competition will lead to difficulties in the realization of inventories and the company will face larger inventories. Pressure of impairment and risk of falling prices.

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."

Terminal stock is not sold out in time

Weaving companies are struggling, foreign trade orders are trembling

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-scale orders, 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.

From the perspective of the recent trade of textile fabrics, the inventory of polyester filaments and terminal weaving products has shown an upward trend, while the inventory of weaving raw materials has been declining since the third quarter, which also confirms the trend of decreasing the scale and frequency of downstream weaving purchases. With repeated epidemics at home and abroad, resistance to textile and apparel exports is relatively high, while domestic demand is sluggish, weaving companies are struggling. At present, many looms have a trend of reducing the burden, and some companies with high inventories have temporarily stopped.

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, the inventory growth of weaving companies has also become extremely fast.

2021 has entered September. At present, the foreign trade situation is still uncertain, and most export textile companies are cautious about orders in the second half of the year. Repeated overseas epidemics, ocean freight, international relations, and superimposed textile and apparel stocks are too high, which has caused foreign trade orders to be jittery.

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.