Apparel / Textiles & Accessories

Since this year, the textile and clothing industry has been under great pressure due to the multiple outbreaks of the epidemic, rising raw material costs, sluggish demand and the characteristics of the industry itself. On the whole, with the efficient and stable international competitive advantage, the export growth momentum will continue on the basis of the international trade export hitting a new high in 2021; However, in the domestic market, the peak season is not strong, and the off-season is even weaker. The performance of most enterprises has been significantly affected.

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

Hidden worries under export growth

Since the beginning of this year, the external demand has been generally good. Although the export of some provinces and cities in China temporarily declined due to the closure of the epidemic, the rapid resumption of work and production after the closure and the smooth recovery of logistics reflect the strong supply chain resilience of China. According to the data released by the General Administration of Customs, in the first half of 2022, textile and clothing exports totaled US $156.49 billion, up 11.7% year on year. Among them, clothing exports grew particularly rapidly.

Lu Fuyong, associate professor of the National Institute of Opening up Studies at the University of International Business and Economics, analyzed that there are three main reasons for China's textile and clothing exports to maintain a rapid growth in the first half of 2022. First, the international market's demand for China's textile and clothing is relatively stable, and orders from the EU, the United States, ASEAN and other major markets fluctuate little. Second, China has a good supply capacity of textile and clothing products, and the structure of export products can be rapidly adjusted with the demand of the international market. For example, this year, due to the general relaxation of foreign epidemic control, China's export of epidemic prevention textile and clothing products declined, but the export of commuting and outdoor clothing products grew rapidly. Third, the export unit price has increased. Affected by multiple factors such as global energy and raw material prices, the export price of China's textile and clothing products has maintained a certain growth rate.

However, the international trade and export situation of the textile and clothing 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, enterprises cannot receive orders, which will directly affect the export data in the second half of the year.

The number of orders decreased. From the long-term trend, the industry generally believes that this is the performance of the transfer of overseas orders to Southeast Asian countries. According to the latest estimate of the China Chamber of Commerce for Textile Importers and Exporters, in the first half of the year, the order transfer scale of China's textile and clothing industry was about US $6 billion. In the second half of the year, China's textile and garment order transfer may also be accelerating.

Lu Fuyong analyzed that international market demand is the main factor supporting export growth. In addition, the increase of such uncertain factors as epidemic situation, geopolitics, trade environment and exchange rate fluctuation is bound to increase the risk of international trade. Of course, it also depends on the supply capacity and marketing capacity of China's textile and clothing export enterprises, as well as the effectiveness of relevant industrial policies.

Fortunately, since this year, China has continued to make efforts in stabilizing foreign trade policies and measures. At the special press conference held by the Ministry of Commerce recently, Zhang Bin, Deputy Director 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 uncertainties. The relevant responsible person said that in the second half of the year, in terms of stabilizing foreign trade, the Ministry of Commerce will highlight the three key points of expanding the increment, stabilizing the stock and strengthening the security, and actively promote exports and expand imports. At the same time, various regions are also actively introducing corresponding policies and measures to stabilize foreign trade.

There are bright spots in the gloomy domestic sales

Compared with the international trade sector, the performance of the domestic textile and clothing sector is relatively bleak. Judging from the early warning of the first half of the year released by a number of listed apparel companies recently, the performance of many enterprises fell significantly.

"Everyone knows that the performance will not look good, but the decline is still unexpected." Ms. Lei, a senior personage in the industry, said.

Women's wear enterprises are particularly affected. Golith expects that the performance will decrease by about 75% in the first half of 2022; The net profit in the first half of the year is expected to be 3.58 million yuan, a year-on-year decrease of 87.14%. Leisure clothing enterprises are also having a hard time. Taipingbird expects that the net profit in the first half of the year will decrease by 68% year on year; In the first half of the year, Meibang Clothing is expected to have a net loss of 620 million yuan to 680 million yuan.

"The domestic sales of textiles and clothing are not optimistic, mainly due to the relatively weak domestic overall consumption." Lu Fuyong analyzed that the impact of the COVID-19 on China's economy and residents' income in the past three years is comprehensive. The residents' consumption ability and level have declined significantly. The rigid demand for women's wear, casual wear and other categories is small, so the sales decline is more significant.

Despite the overall downturn, the textile and clothing industry still has bright spots. From the micro level, some enterprises have achieved good performance. Take Bosden for example. Not long ago, Bosden released its annual financial report for fiscal year 2021/2022. According to the report, the Company achieved revenue of 16.214 billion yuan during the reporting period, up 19.95% year on year; The profit attributable to equity shareholders of the Company rose 20.6% year on year to 2.062 billion yuan; The gross profit margin increased by 1.5% year on year, reaching 60.1%.

From the macro level, retail consumption has rebounded from the bottom. According to the data of the National Bureau of Statistics, from January to June this year, the total retail sales of clothing, shoes and hats, and knitted textiles reached 628.2 billion yuan, down 6.5% year on year. However, in June, the total absolute consumption was 119.8 billion yuan, up 1.2% year on year.

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

There is still huge space in the clothing market, but the premise is to survive. Lu Fuyong believes that for most textile and clothing products with non rigid demand, it is difficult for enterprises to reverse consumer market demand. Some enterprises improve the pertinence of products through supply side reform, such as increasing professional, functional and scenario design, so as to increase consumption demand; The scene based reform of online sales mode also ensures the sales channels of clothing enterprises.

Digitalization brings new opportunities

In June, consumer markets in major economies declined, and the World Bank, the World Trade Organization and other institutions lowered their expectations for world economic and trade growth. In the second half of the year, the textile and garment industry may face a situation of relatively weak demand in both the international and domestic markets, and various uncertainties may increase.

The global economic recovery is not optimistic. Small and medium-sized enterprises should strengthen self-help, reduce costs and increase income. Lu Fuyong suggested that international trade export enterprises should work at both the supply side and the sales side. On the supply side, we should not only optimize the product supply structure and quality, but also reasonably arrange the supply rhythm, attach great importance to international logistics trends, optimize the supply chain adjustment ability, and reduce production costs. On the market side, we should fully tap emerging markets. For example, in the first half of this year, Latin America's international trade exports grew significantly. We can take advantage of trade agreements such as RCEP to actively explore new markets.

For the domestic market, Lu Fuyong said that the transformation of textile and clothing enterprises is mainly to specialization, scene, branding, etc. The design and quality control of the supply side are paid more attention to, highlighting the recognition of products, and thus improving the brand loyalty and recognition of consumers. At the same time, the collectivization development trend of enterprises is also obvious. Comprehensive textile and clothing enterprise groups can better integrate the production and marketing advantages of various categories, forming a strong comprehensive competitiveness.

In the face of the new situation, the Ministry of Industry and Information Technology and other departments recently issued the "Three Products" Action Plan for Digitizing Consumer Goods Industry (2022-2025) (hereinafter referred to as the "Action Plan"), aiming to further promote the "Three Products" strategy during the "Fourteenth Five Year Plan" period to a new level by promoting the consumer goods industry to enhance the integration and application of digital technology.

In this regard, Sun Ruizhe, president of China Textile Industry Federation, said that the introduction of the Action Plan will bring new opportunities for the textile industry to better practice the new development concept, integrate into the new development pattern, and achieve high-quality development of science and technology, fashion, and green in the new era. To implement the Action Plan, the textile industry should focus on three aspects of work: first, improve the industrial ecology, and build digitalization into a new fulcrum for coordinated development and innovation of the industry; The second is to improve basic capabilities and build digitalization into a new fulcrum for stable and healthy development of the industry; The third is to broaden the application scenario and build digitalization into a new fulcrum to leverage the domestic market and smooth the double circulation.

The full scene and specialization of digital technology application has become an inevitable trend in the textile and clothing industry, and also opened a new subdivision track for the industry. Recently, Shenzhen Suying Technology Co., Ltd., which focuses on providing intelligent sewing solutions, completed angel round financing of more than 10 million yuan. The investor of this round is the frontier technology fund of Innovation Works, and the financing will be used for product research and development and customer verification. Ren Bobing, Executive Director of Innovation Works and General Manager of Frontier Science and Technology Fund, said that under the pressure of rising human costs and "labor shortage", industrial automation has become a special drug for China to continue to maintain its status as a "world factory".