Apparel / Textiles & Accessories

Since the beginning of this year, affected by the spread of the epidemic, rising raw material costs, sluggish demand and the industry's own characteristics, the development of the textile and garment industry has faced enormous pressure. On the whole, with the high-efficiency and stable international competitive advantages, the export growth momentum will continue on the basis of the record high export in 2021; however, the domestic market is not prosperous in the peak season and the off-season is even weaker, and the performance of most companies has been significantly affected.

In the second half of the year, the textile and garment industry will still face pressures in terms of cost, demand, order transfer, and the international situation. Industry enterprises must seize the new opportunities of digital transformation and strive to achieve high-quality development in technology, fashion and green.

There are hidden worries under the export growth

Since the beginning of this year, external demand has generally improved. Although exports of some domestic provinces and cities have temporarily declined due to the epidemic control, the rapid resumption of work and production after the unsealing of the blockade, and the smooth recovery of logistics, reflect the resilience of my country's strong supply chain. According to data released by the General Administration of Customs, in the first half of 2022, the cumulative export of textiles and clothing was 156.49 billion US dollars, a year-on-year increase of 11.7%. Among them, clothing exports grew particularly rapidly.

Lu Fuyong, an associate professor at the National Institute of Opening-up at the University of International Business and Economics, analyzed that in the first half of 2022, my country's textile and apparel exports maintained rapid growth due to three reasons. First, the international market demand for my country's textile and clothing is relatively stable, and orders from major markets such as the European Union, the United States, and ASEAN have little fluctuation. Second, my country's textile and apparel products supply capacity is relatively good, and the export product structure can be quickly adjusted with the international market demand. For example, this year, due to the general relaxation of foreign epidemic control and control, the export of my country's epidemic prevention textile and apparel products has declined, but the export growth of commuter and outdoor apparel products is relatively high. quick. The third is the increase in export unit price. Affected by multiple factors such as rising global energy and raw material prices, the export price of my country's textile and apparel products has maintained a certain growth rate.

However, the export situation of the textile and garment industry in the second half of the year is not optimistic. Since the second quarter of this year, many textile and garment factories have encountered the problem of declining export orders, especially small and medium-sized enterprises. At this stage, companies cannot receive orders, which will directly affect the export data in the second half of the year.

The number of orders has decreased. From a long-term trend, the industry generally believes that this is a manifestation of the transfer of overseas orders to Southeast Asian countries. According to the latest estimate of the China Chamber of Commerce for Import and Export of Textiles, in the first half of the year, the scale of my country's textile and garment order transfer was about 6 billion US dollars. In the second half of the year, the transfer of my country's textile and apparel orders may also accelerate.

According to Lu Fuyong's analysis, the demand in the international market is the most important factor supporting export growth. In addition, the increase in uncertain factors such as the epidemic, geopolitics, trade environment, and exchange rate fluctuations will inevitably increase the risk of international trade. Of course, it also depends on the supply and marketing capabilities of China's textile and garment export enterprises, as well as the effectiveness of relevant industrial policies.

The good news is that this year, my country has continued to make efforts to stabilize foreign trade policies and measures. At a special press conference held recently by the Ministry of Commerce, Zhang Bin, Deputy Director-General of the Department of Foreign Trade of the Ministry of Commerce, said that at present, the development of foreign trade faces high risks, great difficulties and many uncertain factors. The relevant person in charge said that in the second half of the year, in terms of stabilizing foreign trade, the Ministry of Commerce will highlight the three major focus points of expanding volume, stabilizing inventory and strengthening security, and actively promote exports and expand imports. At the same time, various localities are also actively introducing corresponding policies and measures to stabilize foreign trade.

Domestic sales are dim and there are bright spots

Compared with the foreign trade sector, the performance of the textile and apparel domestic sales sector is relatively bleak. Judging from the performance warnings of the first half of the year announced by a number of apparel listed companies recently, the performance of many companies has fallen significantly.

"Everyone knows that the performance will not look good, but such a decline is still unexpected." Ms. Lei, a senior person in the industry, told reporters.

Women's clothing companies are particularly affected. Ellass expects that its performance in the first half of 2022 will decrease by about 75%; Ribo Fashion is expected to have a net profit of 3.58 million yuan in the first half of the year, a year-on-year decrease of 87.14%. Life is not easy for casual clothing companies. Peacebird expects a 68% year-on-year decrease in net profit in the first half of the year; Smith Barney's estimated net loss in the first half of the year is as high as 620 million to 680 million yuan.

"The domestic sales situation of textiles and clothing is not optimistic, mainly due to the relatively weak overall domestic consumption." Lu Fuyong analyzed that the impact of the new crown pneumonia epidemic on my country's economy and residents' income in the past three years is all-round, residents' consumption ability and consumption level. There is a significant decline, and the rigid demand for women's clothing, casual wear and other categories is small, so the sales decline is more significant.

Despite the overall downturn, the textile and apparel industry is still full of bright spots. From a micro level, some companies have performed well. Take Bosideng as an example. Not long ago, it released its annual financial report for the 2021/2022 fiscal year. The report shows that the company achieved revenue of 16.214 billion yuan during the reporting period, a year-on-year increase of 19.95%; profit attributable to equity shareholders of the company increased by 20.6% year-on-year to 2.062 billion yuan; gross profit margin increased by 1.5% year-on-year to 60.1%.

From a macro level, retail consumption has bottomed out and rebounded. According to data from the National Bureau of Statistics, from January to June this year, the total retail sales of social consumer goods such as clothing, shoes and hats, and knitted textiles reached 628.2 billion yuan, a year-on-year decrease of 6.5%. But in June, the total absolute consumption was 119.8 billion yuan, a year-on-year increase of 1.2%.

Guosen Securities released a research report saying that it is optimistic about the textile and apparel manufacturing enterprises with outstanding performance and the leading brand apparel manufacturers who take the lead in recovering. Since June, with the recovery of domestic demand driven by the improvement of the epidemic situation, domestic consumption has shown a good rebound trend, and head sports brands have maintained good growth. Optimistic about the investment opportunities of high-quality manufacturing enterprises with good performance and excellent medium and long-term growth. The investment and financing situation of the textile and garment industry also reflects the confidence of the capital market in the industry. According to the incomplete statistics of Tianyancha, from January to July, there were 6 textile and garment financing events, and the financing amount exceeded 700 million yuan.

The clothing market still has huge space, but the premise is that it can survive first. Lu Fuyong believes that for most non-rigid demand textile and clothing products, it is difficult for enterprises to reverse the consumer market demand. Some enterprises have improved the pertinence of products through supply-side reforms, such as adding professional, functional, and scene-based designs, thereby increasing consumer demand; the scene-based reform of the online sales model also ensures the sales channels of clothing enterprises.

Digitization brings new opportunities

In June, the consumer market of major economies declined, and the World Bank, the World Trade Organization and other institutions lowered their forecasts for world economic and trade growth. In the second half of the year, the textile and apparel industry may face relatively weak domestic and international market demand, and various uncertainties may increase.

The global economic recovery is not optimistic. Small and medium-sized enterprises should strengthen their self-help, reduce costs and increase income. Lu Fuyong suggested that export enterprises need to exert their efforts on the supply side and the sales side at the same time. On the supply side, it is not only necessary to optimize the product supply structure and quality, but also to reasonably arrange the supply rhythm, attach great importance to international logistics trends, optimize supply chain adjustment capabilities, and reduce production costs. On the market side, it is necessary to fully tap emerging markets. For example, in the first half of this year, the export growth of the Latin American market has been very significant. We can take advantage of the new advantages of trade agreements such as RCEP to actively explore new markets.

For the domestic market, Lu Fuyong said that the transformation of textile and garment enterprises is mainly towards specialization, scene-based, branding, etc., and the design and quality control of the supply side have been paid more attention to highlight the recognition of products, thereby enhancing consumers' brand loyalty. and recognition. At the same time, the group development trend of enterprises is also more obvious. Comprehensive textile and garment enterprise groups can better integrate the advantages of production and sales of various categories to form a strong comprehensive competitiveness.

In the face of the new situation, the Ministry of Industry and Information Technology and other departments have recently issued the Action Plan for Digitalization to Help the Consumer Goods Industry "Three Products" (2022-2025) (hereinafter referred to as the Action Plan), which aims to enhance digital technology by promoting the consumer goods industry. Integrate application capabilities to further promote the "Three Grades" strategy during the "14th Five-Year Plan" period to a new level.

In this regard, Sun Ruizhe, president of China National Textile and Apparel Council, said that the introduction of the "Action Plan" is for the textile industry to better implement the new development concept, integrate into the new development pattern, and realize the high-quality development belt of technology, fashion and green in the new era. New opportunities come. To implement the "Action Plan", the textile industry should focus on three aspects: one is to improve the industrial ecology, and make digitization a new fulcrum for the coordinated development and collaborative innovation of the industry; the other is to improve basic capabilities and make digitalization a stable and healthy industry. A new fulcrum for development; the third is to widen application scenarios and make digital a new fulcrum for leveraging the large domestic market and smoothing the dual circulation.

The full-scenario and specialization of digital technology applications has become an inevitable trend in the textile and apparel industry, and has also opened up a new subdivision track for the industry. Recently, Shenzhen Suying Technology Co., Ltd., which focuses on providing intelligent sewing solutions, has completed an angel round of financing of over 10 million yuan. The investor in this round is the Innovation Works Frontier Technology Fund. The financing will be used for product development and customer verification. Ren Bobing, executive director of Innovation Works and general manager of the Frontier Technology Fund, said that under the pressure of rising labor costs and "labor shortages", industrial automation has become a special medicine for my country to continue to maintain its "world factory" status.