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Around the spring festival of 2019, the spandex operating rate in China declined to below 80 per cent. Monthly operating rate of the spandex industry was at 79 to 83 per cent in the second half of this year, which was lower than the same period last year. The spandex industry operating rate is anticipated to gradually get close to around 80 per cent. In the third and the fourth quarter, spandex industry inventory continued to slowly fall. In the second half of this year, demand for covered yarn, warp knitting and double-faced circular knitting for spandex was considerable. Coupled with the shutdown and production reduction of old spandex units, the annual spandex output growth was extremely small compared with the same period of last year. Inventory of spandex plants hit a high at the beginning of the third quarter, and it was in a slow downward tendency at the end of the year, with an inventory drop of around ten days.
Spandex downstream weaving plants may collectively shut down for taking a holiday during the spring festival. Though spandex plants are likely to decrease the operating rate, the drop may be smaller than that of downstream. During the spring festival, inventory of spandex plants is anticipated to move up, which may restrict the growth in market after the spring festival.
Bangladesh’s export earnings fell 5.84 per cent in the first six months of the fiscal. Receipt between July and December was also 12.77 per cent lower than the half-yearly target. Of the six months, shipments rose only in July and December. Exports rebounded in December, registering a 2.89 per cent growth. In the first half, shipments of apparel, which usually make up more than 80 per cent of national exports, fell 6.21 per cent. Knitwear exports were down 5.16 per cent and woven exports declined 7.28 per cent. However, export earnings from apparel items improved a bit in December in comparison to November. But the increase in December does not signify that the sector is turning around as such. The first two weeks of December remained negative while the second half picked up slightly.
Leather and leather goods are the second highest export earner for Bangladesh after garments. But between July and December, export earnings from leather and leather goods fell 10.61 per cent. Worse, the possibility of a rebound for export of leather and leather goods over the next two years is dim as the demand for non-leather goods is on the rise worldwide. Non-leather goods are seen as comfortable and less expensive compared to leather goods.
"Both department stores and apparel retailers in the US lost ground in 2019 as consumers increasingly turned to online shopping. Worst affected were stores like Macy’s and Gap, along with Kohl’s Corp., L Brands Inc. and Nordstorm Inc., which emerged as the poorest-performing individual stocks on the S&P index. These brands lost most of their market share to online and discount retailers like Ross Stores Inc. and TJX Cos., which owns Marshalls and T.J. Maxx."
Both department stores and apparel retailers in the US lost ground in 2019 as consumers increasingly turned to online shopping. Worst affected were stores like Macy’s and Gap, along with Kohl’s Corp., L Brands Inc. and Nordstorm Inc., which emerged as the poorest-performing individual stocks on the S&P index. These brands lost most of their market share to online and discount retailers like Ross Stores Inc. and TJX Cos., which owns Marshalls and T.J. Maxx.
As per Credit Suisse, over 7,600 stores closed during 2019 and the outlook for 2020 does not look any brighter. However, many US department stores and apparel retailers plan to buck this slowdown and bounce back by closing their stores, shrinking their store sizes and offering more experiences like old-fashioned tailoring and trendy in-store cafes to attract customers.
Department stores to scale down operations
Most department stores will scale down their store fleets. Macy’s, which has about 640 namesake stores, has been gradually closing locations since 2016. Similarly, J.C. Penney,
which has about 850 stores in the US, closed a handful of them this year. Due to these closures, the S&P 500 department stores index is set to drop close by around 30 this year, the biggest decline among all S&P 500 industry indices. Like Macy’s and JC Penney, Gap too plans to shut about 230 stores with more focus on Old Navy and Athleta brands. Preppy apparel retailer Abercrombie & Fitch Co. is also closing flagship stores. Retailers who don’t plan to close their stores may shrink their sizes. As Sucharita Kodali, an analyst at Forrester Research reveals, Lord & Taylor plans to introduce new, more compact stores.
Focus on new retail experiences
Department stores also plan to reorganise their apparel spaces. They might follow the Nordstrom Local model, which focuses on tailoring, returns and helping customers find a specific look, rather than selling items. They might also focus on setting up their showrooms near recreational spaces like restaurants, bars and cafes. GlobalData research reveals for online thrift store ThredUp, the second-hand apparel market is expected to grow to $32 billion in 2020. This will compel apparel companies to either revise their inventory or join the resellers. Retailers will also collaborate with resellers like ThredUp for selling their collections.
However, the new accounting regulations could impact the income of retailers and department stores from credit cards. Department stores will be affected more as they rely more on credit income. Most hit will be Macy’s followed by Target.
Pakistan’s cotton growers and ginners want the five per cent tax to be withdrawn. They say, if the five per cent duty on import of cotton were removed, prices of local cotton would further decline. Cotton growers’ complain that only the proposal for withdrawal of duty on imported cotton is under consideration and not on cotton seed oilcake. The price of cotton oil seed has decreased compared to oilcake, which this is alarming as the oil is supposed to be extracted from cotton oil, which is used in animal feed. The country has to import more edible oil due to this situation.
If cotton is imported at the current duty rate, it is cheaper than local cotton. The duty draw facility is also available to the textile sector on re-export of that commodity.
Due to this situation growers have stopped investing in the cotton crop. Even when there is a shortage of cotton in the country its prices are declining. Cotton growers say when there is a need to support cotton, its prices drop and the price gap between the Pakistan market and the international market widens, as the All Pakistan Textile Mills Association (PTMA) is a single buyer influencing the market
Although Nike Inc’s quarterly revenue and profit blew past Wall Street expectations on strong sales in China, the brand registered a lower-than-expected growth in North America, its biggest market. The world’s largest footwear maker faces intense competition from brands like Adidas , Skechers and VF Corp’s Vans in North America, even as it pushes to sell exclusive merchandise through its tap-and-buy SNKRS app and retail stores.
Nike’s revenue from North America rose by 5.3 per cent to $3.98 billion in the second quarter, compared with the previous year’s 9 per cent rise, but missed Wall Street expectations of $4 billion. The company’s gross margin of 44 per cent was also slightly below estimates of 44.1 per cent, hurt by higher product costs due to incremental tariffs in North America.
In Greater China, the fastest-growing market for Nike, its revenue rose by 20 per cent to $1.85 billion. The company recently introduced its app in the country. According to IBES data from Refinitiv, Nike’s net income jumped 31.6 per cent to $1.12 billion, or 70 cents per share, in the quarter ended Nov. 30, while analysts on average had expected 58 cents per share. Its overall revenue rose by 10.2 per cent to $10.33 billion, beating the average analyst estimate of $10.09 billion.
The Chinese textile industry faced a rough time in 2019. This was true for cotton, polyester and viscose. Rayon yarn mills will not completely switch production but they prefer polyester/rayon blended yarn which has similar prices but cheaper costs and considerable profits compared with pure yarn. Therefore, both vortex-spun and open-end rayon yarn also saw a production shift.
Some pure spinning machines will be occupied, but they dispersed rayon yarn’s competition burden and to a certain extent maintained the stability of the operating rate of rayon yarn mills. Polyester yarn was supported by market feedback orders and the polyester market.
Rayon yarn had sales and profits advantages compared with cotton yarn. It was mainly cotton yarn mills that cut production. Polyester/cotton yarns were preferred, and the proportion of viscose flowing into them was not high. As for market demand, assuming that prices and market fluctuations of the three major feedstock remain similar this year, the situation in 2020 will be similar to that in 2019. As for viscose staple fiber, there was still a certain increase, but it was hard to give much strong support to the market. Stronger market fluctuations also require a combination of supply and demand changes.
Lifestyle brand Shoppers Stop will set up an apparel manufacturing facility in Telangana’s Sircilla apparel park. The project is expected to create employment opportunities for hundreds of women.
A South Korean company is also investing in Telangana. Youngone is setting up a 290 acre facility at Telangana’s Kakatiya Mega Textile Park. This fiber-to-fabric integrated textile cluster is built on 1,200 acres of land. Over a dozen companies have come forward to set up their manufacturing operations in the park with a combined investment of over Rs 3,900 crores. Youngone is a South Korean textile and apparel major. The facility would involve manufacture of knitted and woven garments for outdoor wear and technical textile products, predominantly for exports. It is estimated that more than 12,000 jobs would be created through this project. The Kakatiya mega textile park is the first industrial park project to reach the ground-breaking stage in three years after the formation of the state. The project also assumes significance due to its location in the cotton-rich Warangal region which was once a hotbed of Naxalite activities in Telangana. A state-of-the-art infrastructure featuring common effluent treatment and zero-liquid discharge facilities besides ready-built factory sheds will be developed in this park.
Louis Vuitton will shut one of its shops in Hong Kong. Protests have hit demand as high rental costs bite. The decision to close the shop came after the company failed to reach an agreement with its landlord to cut rent in the mall outlet.
Louis Vuitton, the world's biggest luxury goods brand by sales, has eight shops in Hong Kong, one of the world’s top shopping destinations. High end fashion labels have hunkered down in Hong Kong since demonstrations escalated in June. Hong Kong’s retail sales fell 23.6 per cent from a year earlier in November. Until now, luxury brands had only shut stores in Hong Kong temporarily when protests flared. Some brands are weighing up redirecting some of their investments elsewhere, including to the Chinese mainland and other parts of Asia where many have managed to make up for lost sales in Hong Kong. Some brands are trying to renegotiate notoriously high rents in Hong Kong as one way of mitigating the hit to operating margins.
Hong Kong has long drawn numerous tourists from the Chinese mainland who pick up luxury cosmetics, accessories and clothing at slightly lower prices than at home.
LVMH, based in France, owns Louis Vuitton apart from other fashion brands like Christian Dior and Hennessy.
BGMEA has opposed the 22 per cent hike in different container handling charges raised by private inland container depots (ICDs) as it would increase their costs sharply affecting the export activities at a time when the sector is passing a tough time. The association also stated that the private ICDs/off/-dock operators cannot collect the enhanced charges without the ministry’s approval.
On December 12, Bangladesh Inland Container Depots Association (BICDA) increased empty container handling charges and export goods stuffing package charges by 22 per cent and instructed all the private ICDs to collect the enhanced rates from January 01, 2020. Under the enhanced charges, for a 20 ft. export container the package (stuffing) costs have increased to Tk 4,390 from Tk 3,600 and the ground rent has gone up to TK 125 from Tk 100 per day. Landing charges have risen to Tk 220 from Tk 180 per tonne and CFS storage charges after seven days have increased to Tk 30 from Tk 25 and the per container VGM charge to Tk 1,220 from Tk 1,000. For a 20-ft. empty export container, the charges for per day ground rent, lift on/off, documentation charges and one-way transportation/haulage have increased by Tk 22, Tk 66, Tk 52 and Tk 220 respectively.
In the last decade, Inditex has shifted most of its factories from the European Union to Asia. In 2008, 43.5 per cent of the group's suppliers were within the common market. Ten years later, their share has dropped to 24.6 per cent. In 2008, the European Union housed 43.5 per cent of the Spanish group’s suppliers. Ten years later, their share has been reduced almost by half, to 24.5 per cent.
The throne that Europe has lost is now held by Asia, which already represents 55.7 per cent of the total network of suppliers for Zara’s matrix. Ten years ago, the region accounted for 35.2 per cent, with just 417 suppliers.
A decade ago, Inditex totaled seven productive clusters in the world: Morocco, Turkey, Bangladesh, India, Portugal, Spain and Cambodia. In the last ten years, the company has added five more, Argentina, Brazil, Pakistan, China and Vietnam. In total, the twelve areas contribute 96 per cent of the group's production. The African continent, meanwhile, today houses 145 Inditex suppliers, 44 more than in 2008.
In these ten years, the group has also made progress in transparency and compliance. In 2008, the company conducted 655 social audits. In 2018, the group conducted 12,065 audits.
