FW
The American Apparel and Footwear Association (AAFA) has welcomed US Senate approval of a S$2 trillion war chest which will ease the hardship felt by businesses across the country since the outbreak of the COVID-19 which is now rampant in the states.
An estimated 3.3 million people filed for unemployment in the USA last week alone as it reels from a surge in virus cases and a huge hit to its economy. Senators have now agreed to the terms of a new bill which will provide direct payments of $1,200 to millions of individuals who earn $75,000 or less, and an additional $500 per child. Whilst $500bn is set aside to help companies via a loan system and $350bn has been designated to support small businesses.
AAFA has urged the US President to swiftly approve the bill – an action Trump has already affirmed that he will – to alleviate the strains felt on business owners and employees across the country.
This legislation will inject liquidity into the system allowing companies to sustain operations, and keep employees on the payroll so they start up quickly once health authorities give us the all clear.
Broken down, the bill – passed following a brief hiccup as Democratic and Republican Senators squabbled over unemployment benefits – will alleviate some of the financial burden left on the doorsteps of individuals paid under US$75,000, which will now be afforded a monthly pay packet of US$1,200 until they’re able to resume work.
UBS analysts say Nike Inc. shoppers who couldn’t get to stores that were shuttered by the pandemic flocked to e-commerce channels during the fiscal third quarter. The brand’s digital earnings accounted for about 20 per cent of the company’s overall business, with digital sales rising 36 per cent on a currency-neutral basis during the fiscal third quarter.
In China, while people were isolated at home, Nike weekly active users on its activity apps increased by 80 per cent by the end of the quarter versus the beginning. Digital business in China grew 30 per cent. Nike has $5.5 billion in liquidity, accounting for just 14per cent of calendar 2019 sales. In comparison, Ralph Lauren’s 6.30 per cent or $2.4 billion, but that accounted for 38 per cent of last year’s sales.
UBS suggests t Nike will be in an even stronger competitive position when the Covid-19 situation ends versus our prior view. The brand is operating from a position of strength s demand remains strong. As Raymond James analyst’s reveals coronavirus is encouraging a majority of its consumers to shift ito digital channels.
Mothercare has substantially completed its transition to refocus on brand management and design, development and sourcing of product for its global franchise partners. In the UK, many head office staff are working productively from home but a number of its retail personal are unable to do so. UK government support is being used for around 430 of its Boots Mini-Club retail workers.
The impact of COVID-19 on its franchise partners globally is likely to lead to a “material” impact on Mothercare’s short-term revenues. But it added that the experience it gained as a result of the controlled supply shock that was exerted upon the business at the time of the administration of Mothercare UK and related store closures last November, is proving invaluable. It is currently negotiating with its franchise and manufacturing partners, as it seeks to manage and mitigate the overall impact on both our and their businesses.
The company has made progress in reducing its debt and is in talks with a number of debt providers regarding entering new debt facilities. It plans to focus efforts on helping to preserve the businesses of our franchise and manufacturing partners through even more collaborative ways of working, to ensure both the short term liquidity of our business together with our return to longer-term profitability.
Louis Vuitton owner LVMH could “accurately” calculate at this stage the impact of the closures of production sites and stores linked to the coronavirus outbreak around the world. The French luxury goods group will publish its sales figure for the first quarter on April 16, after the close of the Paris market. The brand expects it to decrease in a range between 10 and 20 per cent compared to the same period last year.
In the short term, the measures taken by public authorities to combat the Covid-19 pandemic have resulted in the closure of production sites and stores of the brand in several countries which will have an impact on the group's results. The brand has stated that this impact cannot be accurately calculated at this time without knowing the timing of a return to normal in these countries.
According to GlobalData, with the COVID-19 pandemic putting a stop to all non-essential travel, technology is now taking a front seat in communication between clothing brands and their suppliers. Buyers are now rethinking how they work with manufacturers on orders and product design.
UK clothing and homewares retailer Next is looking at a number of different scenarios to make up for the lack of face-to-face contact with its suppliers, including video conferencing. Teams would previously have travelled to factories to work on new product development, but are now asking manufacturers to send samples over. Video conferencing, with one sample at each end, is helping to recreate the process.
Software companies are also stepping in to help, particularly as more employees start working from home to try and stop the spread of the virus. Tukatech, for example, is offering CAD customers the opportunity to switch to a cloud license at no charge, allowing them to work from anywhere. While Centric Software has launched a series of quick-start, online collaboration packages designed to get brands, retailers and manufacturers working remotely.
The dynamic of sourcing and machinery trade shows is also changing, with organisers looking at virtual and other digital alternatives as the pandemic forces the cancellation of myriad events around the world.
Companies are finding new ways of staying in touch that they maybe haven’t considered previously. So having the right technology in place to enable a company to keep communication flowing across its supply chain has now become imperative if they want to remain operational.
Weighed by the impact of COVID-19 outbreak, India's exports to China and Hong Kong together slumped 41 per cent in February while imports declined more than 10 per cent. However, a sudden jump in exports to United States and United Arab Emirates during the month led to India's overall exports turning positive for the first time in seven months.
Official trade data reviewed by Mint showed India’s exports to China dropped 13.7 per cent in February to $1.1 billion while shipments to Hong Kong declined 62.4 per cent to $681 million. Similarly, imports from China due to supply chain disruptions fell 13.3 per cent to $4.4 billion while imports from Hong Kong which was less affected by COVID-19 outbreak picked up 3.7 per cent to $1.1 billion.
Retail sales in China fell by 14 per cent in January and 21 per cent in February combined. International agencies have significantly reduced their growth estimates for China with the rating agency S&P estimating an unprecedented 10 per cent contraction in China’s economy in January-March quarter while 2020 calendar year growth projection for the world’s second largest economy has been slashed to 2.9 per cent from 4.8 per cent for 2020.
According to Crisil if the pandemic is not contained soon, China’s demand for cotton, iron ore, and petroleum products from India is likely to suffer. Imports related to pharmaceuticals, automobiles, consumer durable, electronics and telecom/ smartphone equipment could also bear the brunt, hurting these sectors domestically.
The Apparel Export Promotion Council (AEPC), which represents the interests of the garment industry in India, has sent a letter to main operators in Europe and the United States urging them not to cancel orders in present times, while at the same time opening itself up to seeking flexibility measures.
Besides Primark, several companies have communicated to their investors over the last few days that their adjustment plans to deal with the pandemic include adjusting their purchases. British group Superdry, for example, will introduce "potential changes in the timing and structure of stock purchases for the next collection". In early March, the United Nations (UN) made a first approach to the impact of the pandemic on the fashion industry worldwide. The organization estimated losses in the textile and apparel industry at $1.5 billion, mainly due to a lack of raw materials.
The UN indicated that the most affected market will be Europe, with losses of $538 million; Vietnam, with $207 million; Turkey, with $164.2 million; Hong Kong, with $107 million; Taiwan, with $102 million, and the United States, with estimated losses of $80 million.
The entity chaired by António Guterres did not, however, contemplate order cancellation that is already taking place: in recent weeks, 490 factories in Bangladesh, one of the world's largest hubs, had received order cancellations with an impact of US$1.44 billion on the country's exports.
The impact of the cancellations is not limited to Asian markets, but also extends to nearby sourcing. In Turkey, where large groups have displaced their production with the stoppage of China, order cancellations are beginning to be registered, a situation that is repeated in Morocco.
According to the data by BGMEA, fashion retailers have cancelled or put on hold more than $3 billion in orders due to the coronavirus outbreak, though a handful have agreed to pay anyway.
The recently released data from BGMEA reflected both orders already made or in the works and planned orders from the country, which is the world's second largest exporter of clothing after China.
The cancelled orders included tens of millions in purchases from many big buyers, including European buyers C&A and Inditex, Primark of Ireland, Britain's Marks & Spencer and Tesco and U.S. retailers like Walmart and Target.
Bangladesh is just beginning to feel the direct impact of the pandemic and its government has ordered a shutdown of most businesses to help contain it. But shocks to the country's export markets have been cascading into its economy for weeks. A survey of factory owners in Bangladesh released Friday showed millions of Bangladesh factory workers being sent home without the wages or severance pay they are owed.
The BGMEA reported that $1.8 billion in orders have been put on hold and another $1.4 billion have been cancelled. Cancellations of planned orders, for April-December, amounted to nearly $1.7 billion, it said. The figures are conservative because they exclude orders that would go to multiple buyers.
Reliance Industries has announced a donation of Rs. 500 crore to PM Cares Fund in response to the call by the Prime Minister to support the nation’s fight against the Coronavirus onslaught.
RIL also informed that in addition to the financial contribution to the PM’s Fund, the company has also provided contributions of Rs. 5 crore each to the governments of Maharashtra and Gujarat to support their fights against the Covid-19.
RIL also continues its 24x7, multi-pronged, on-the-ground effort to do its bit to ensure the nation remains prepared, fed, supplied, safe, connected and motivated to fight and win against the unprecedented challenges brought upon by the Coronavirus pandemic.
RIL has already deployed the strengths of the Reliance Family on this action plan against COVID-19. RIL and its motivated team have stepped up in the cities and villages, on roads and lanes, clinics and hospitals, grocery and retail stores, and it has pressed additional capabilities into the service of the nation.
With the COVID-19 pandemic gaining momentum, the impact on fashion and luxury industry is likely to be more severe than was estimated earlier. As a recent analysis by Javier Seara, Partner and Managing Director, Global Sector Leader Fashion & Luxury, at Boston Consulting Group, reveals, compared to last year, global fashion and luxury sales are likely to drop by 25 to 35 per cent in 2020 as stores will remain closed, people will curtail purchases leading to a contraction of the global economy. To deal with this fallout, Seara recommends, besides working on short-term measures, brands need to plan their upcoming collections, stock allocations, purchasing, and supply-chain decisions.
Sales drop to outpace 2009 recession
Seara believes a major impact of this pandemic will be on fashion sales which are likely to decline by around $600 billion worldwide from 2019 levels. That is a bigger drop than during the great recession a decade ago. However, this impact will not be the same everywhere. It will depend on how different countries and regions have reacted to the crisis so far and the effect of those actions on their retail spending. Some areas are likely to hit harder than the average, while others will escape with relatively less damage.
The four phases of Coronavirus
According to Seara, COVID-19 outbreak can be divided into four phases. These include the first appearance of the novel Coronavirus; lockdowns across
countries to control its spread; growth in COVID-19 subsidies leading to a bounce-back of industry and recovery of manufacturing and increase in consumer spending to pre-outbreak levels.
Seara looks at the intensity of the crisis in each region, how it responded to it, and specific market conditions that affect the sector’s sales in that area. These conditions include the strength of local economy and the market share of its fashion industry. Seara believes overall sales will bottom out in March and April to bounce back with10 per cent to 15 per cent in December over last year.
Recoveries to differ by region
Recoveries from the outbreak will differ by region. Countries that faced a severe outbreak, and whose economy is not as solid as others, will have a harder time recovering. This can be seen from the example of Spain, where, a government-enforced shutdown has led to a more than 90 per cent drop in Spain’s fashion and luxury sales from last year. Shutdowns in such places will result in slower recovery that will be exacerbated by travel restrictions.
In contrast to Spain, China is in better shape to weather the crisis. Not only has the country passed the COVID-19 crisis point, it also has a solid pre-outbreak economy, which will help it recover fairly quickly. The country is likely to record fashion and luxury sales off only 5 per cent to 10 percent from 2019. North America falls in the middle range as a few US states have instituted shelter-in-place orders while others are yet to limit people’s movements. This is likely to affect the pace of the outbreak in the region and prolong its bounce-back period. By detailing these scenarios in each of these countries, Seara hopes that brands use this analysis to strategise their moves for the rest of the year.
