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H&M has reported the biggest drop in quarterly sales in at least a decade.
Fewer customers are visiting its flagship locations, leading the company to pare expansion plans and consider closures. The stock fell as much as 16 per cent, the steepest intraday decline since March 2001.
Sales excluding value-added tax fell four per cent in the three months through November. Sales have declined in only three quarters in the past ten years.
Almost 15 per cent of H&M’s free float -- the shares that are readily available to trade -- has been shorted. In a short sale, investors borrow shares and sell them in the hope that they decline, allowing them to repurchase them more cheaply and pocket the price difference as profit.
H&M’s supply chain lacks reactivity, which is one of the group’s structural issues in front of abrupt changes in fashion. The company aims to accelerate a transformation plan to better integrate physical and digital stores.
H&M had planned a net addition of 385 stores this year, which includes 90 closures. The company had also aimed at having online sales in 43 markets by year-end.
A crisis that’s shuttered shopping malls in the US is spreading to other parts of the world, hitting H&M’s earnings and forcing the retailer to cut prices to clear out inventory.
Over the last three months Ethiopia’s earnings from textile and garment exports have been growing.
The growth of the textile industries has triggered the expansion of cotton farming by public, private sector and small scale farmers. Currently, cotton is being farmed on a total of 42,000 hectares of land.
Foreign investment is flowing in thanks to the prevalence of peace and stability, availability of abundant cheap labor, plenty of cheap energy from hydro power and flourishing industrial parks all over the country.
Thanks to the enabling investment environment foreign companies are injecting their money, technology, experience as well as skills into the sector. In addition, foreign investors are encouraged through the provision of various incentives including tax holidays, tax free capital goods imports, custom services provision on the spot and easy access to financial credit.
The world number one US textile industry known as HDM has installed its factory in Hawassa Industrial Park creating 10,000 jobs and expected to create many more jobs in the coming years. Most graduates from technical colleges would benefit from these job opportunities.
Cotton traders at Enumamula Market yard in Warangal on Friday protested against the reverse charge mechanism (RCM) on cotton under the GST regime. They pressurised officials to discuss the issue at the next GST Council meeting on December 21 or they would intensified protests.
To this effect, they called for a ‘bandh’ at the market following a directive given by cotton associations across the country. Traders questioned why cotton was chosen despite it being a non-edible commodity that can be traced till its last form of existence for realisation of taxes, unlike edible commodities.
The traders said the instant notification has been issued without proper assessment of its working results and its effects on the cotton trade. They urged the government to consider the reactions to the introduction of GST act over the past two months and various issues, sweeping changes brought about that never seen in history over the implementation of any other fiscal system or policy in the country.
B Ravinder Reddy, President of the Telangana cotton millers and traders welfare association averred,“A move to introduce a fresh point of levy does not go well, as can be seen from the protests going on in different parts of the county. The displeasure is exhibited with ‘bandh’ calls. In this case, it will hit the farmers as the price of cotton will be affected. The government and the trading community must work together to keep the farmers’ interests at the forefront and keep them on a happy pedestal, but with limitations.
“The move to levy tax on purchase will block working capital of trader, in the first instance and later even if he is eligible for possible refund, when export is made, it does not help him as it is a time-tested factor that refunds do not come at a proper time stated or mentioned but has to cross various unsavory hurdles,” he added.
The traders sent a letter to the Finance Minister, Etela Rajender asking him to intervene in the present situation and resolve issues amicably.
Official forecasts of US and world cotton ending stocks have got tighter. A 3,40,000 month-over-month increase in foreign consumption, most of which was in India, reinforced the tightening of the world balance sheet. The bottom line was a large 2.88 million bale reduction in 2017-18 world ending stocks. Such an adjustment would be price supportive.
The December revisions to 2017-18 US cotton continued a trend of modest adjustments to US production and ending stocks. On the supply side, the all-cotton national average yield was raised slightly to a record 902 pounds per acre. This resulted in a 63,000 bale net increase in US production.
US exports were raised 3,00,000 bales month-over-month, presumably to jibe with the historically fast pace of total export commitments of US cotton. The upward revision of US exports made up for the downward adjustments in foreign production. After slightly adjusting the unaccounted fudge factor, projected US ending stocks declined from 6.1 to 5.8 million bales, month over month.
The reduction in supply on the Indian subcontinent is in keeping with recent news reports and speculation about lower production there, so this outcome was probably expected by many traders and analysts.
The holidays are generally not known for tightening. Wallets get lighter. Beltlines get wider.
Bangladesh has called for investments from Indian entrepreneurs to give a boost to its growing readymade garment manufacturing sector. The country wants to utilise the market share vacated by China with proper investment inflow. This is where the opportunity for Indian investors lies.
With a friendly political and commercial environment, an over 4000 km common boundary and well set immigration as well as communication facilities, Bangladesh is seen as a favorable land for Indian entrepreneurs. The similar social environment between the two countries is another positive factor. While Indian entrepreneurs can gain out of their investment in the sector in Bangladesh, more number of workers from Bangladesh can have employment.
While the global clothing products market has gone down to 444 billion dollars in 2016 from 450 billion dollars in 2015, Bangladesh could have increased its share in global apparel exports up to 6.4 per cent from 5.9 per cent during the period to maintain its second position in the sector. But the share of China, the undisputed first, has gone down from 39.3 per cent to 36.4 per cent while the other close competitors, Vietnam, India, Turkey and Cambodia, recorded a share of 5.5 per cent, four per cent, 3.4 per cent and 1.4 per cent respectively.
The latest volume of the AATCC Technical Manual will be available beginning January 1, 2018. Each year, the manual includes new test methods, revisions and updates of existing methods and evaluation procedures for textiles.
AATCC, provides test method development, quality control materials, and professional networking for members in about 50 countries worldwide There are two new methods and there are 18 revised standards appearing for the first time in the 2018 volume .
AATCC is known worldwide for its test methods and evaluation procedures, particularly those related to chemistry, colourfastness, laundering, moisture management, and water resistance. Each document is reviewed and approved by a committee of industry experts before publication. All are welcome to participate in the committees. Varied perspectives are valued, and every submitted comment is considered in the development or revision of a method. AATCC believes this consensus approach creates the best, most robust test methods to serve a diverse modern textile industry.
The 2018 volume of the AATCC Technical Manual contains all 150+ current AATCC test methods, evaluation procedures, and monographs. The hard- bound black and gold book is a staple reference in many textile laboratories. The PDF version offers the added convenience of a search function and hyperlinks among cross-referenced methods. The newest version of either is critical for meeting current testing requirements and specifications.
The hard-bound 2018 Technical Manual and searchable PDF version will be available from January 1, 2018.
"In the race to reach customers first and offer them trendy clothes, fashion industry is increasingly ignoring the alarming signs of eco-concerns. As the year end draws closer, the industry must step up to the challenge and redeem their terrible track record by reducing carbon emissions. While leading companies’ CEOs continue to delay the climate commitment process, denim supply chains are continuing the harmful emissions into the atmosphere without any alternative."
In the race to reach customers first and offer them trendy clothes, fashion industry is increasingly ignoring the alarming signs of eco-concerns. As the year end draws closer, the industry must step up to the challenge and redeem their terrible track record by reducing carbon emissions. While leading companies’ CEOs continue to delay the climate commitment process, denim supply chains are continuing the harmful emissions into the atmosphere without any alternative.
Creating small quantities is a characteristic inherent in the handloom industry. For handloom to imitate machineA report by Carbon Disclosure Project reveals, companies within the fashion sector might be ignoring as much as 90 per cent of the climate pollution they generate. The fashion industry is attempting to solve the problem of its own emissions by outsourcing production to contractors in countries with less strict emissions regulations, namely China or Bangladesh. But the problem seems to get worse with time. The industry generates about 3 per cent of global greenhouse gas emissions, roughly equal to the pollution created by putting 163 million new passenger cars on the road. A study by a leading clothing company concluded that one pair of denim jeans produces 44 pounds of greenhouse gas emissions, equivalent to driving a car almost 48 miles or burning over 21 pounds of coal. Manufacturing a single pair of denim jeans produces 44 pounds of CO2, roughly equal to the greenhouse gas emissions from driving a passenger car nearly 50 miles.
Time to clean up the act
Companies need to step away from climate commitments that are a partial solution to its role in the climate crisis. There must also be significant reductions across the fashion industry’s entire supply chain, including calling on overseas producers to hold themselves to higher standards than may often be the case. The bulk of fashion’s climate pollution (an estimated 60-90 per cent on average) comes from material sourcing, garment production and transport. Yet, some companies’ climate commitments leave out this basic part of their pollution footprint. There are numerous tools and technologies available for companies to make major reductions in these stages—even from independently owned factories overseas.
As a start, they first need to demonstrate farsightedness, engaging with climate issues in a long-term, sustained way. Second, they must pledge full transparency in their efforts to bring down emissions. Currently, only H&M and Kering provide full transparency on greenhouse gases in their supply chain. Real climate action requires fashion companies to assess, track and disclose their full climate pollution footprint and reductions over time. While there are social campaigns running, the impact still needs to be weighed upon.
Sangam the flagship company of the Sangam Group, and Rs 4,000 crore plus business conglomerate has progressively evolved over the years with business spread across textiles, steel, real estate, power and the energy sectors. Established in 1985, Sangam is today amongst the dominant players in man-made textile sector with integrated presence across the vale chain, from spinning to weaving, to processing and garmenting. Further, the company is the largest producer of PV-dyed yarn in Asia with manufacturing units located at Bhilwara and Chittorgarh in Rajasthan. Sangam clocked in a turnover of Rs 1,593.64 crore in 2016-17. With yarn manufacturing capacity of 83,200 MTPA it is exporting to over 45 countries worldwide.
Sangam has total spinning capacity of 2,38,608 spindles, 510 looms, five denim processing lines, 36 seamless garment knitting machines, three texturizing machines and a 31 MW coal-based captive thermal power plant. The company has also 3,128 rotors, 53.40 MMPA fabric processing, 22 knitting machines, 511 MTPA garment processing capacity, a 1 MW captive solar power plant and a 5 MW wind power plant at Jaisalmer.
Sangam has undertaken capacity expansion projects at an investment of Rs 135 crores. It is in the process of installing one line of 12 rope indigo dyeing machines, 73 new and 5 old weaving machines at the denim unit in Bhilwara. The company is also looking at installing balancing and modernized machines at Spinning Unit-1, II and processing units. The entire installations under the expansion programme would be completed by the end of 2017.
A key player in the dyed yarn and fabric manufacturing segment. It has forayed into activewear seamless garments with the launch of its brand C9 in 2015. C9 has expanded its range to intimate wear, shape wear, activewear and casual wear among others. Sangam has also exclusively invested in 36 seamless garment knitting machines with an annual production capacity of 3.6 million pieces. It has opened two exclusive brand outlets, strengthening the existing network of 750 multi-brand outlets across 25 states. The network will be further strengthened to improve visibility of the C9 brand. The company floated a 100 per cent subsidiary, Sangam Lifestyle Ventures, to expand its retail business. It has plans to further expand into 2,000 multi-brand outlets along with 100 large format stores and exclusive brand outlets by end of FY2019.
A consortium of government organisation, labour groups and academia has implemented a three-year project in Myanmar to improve the work environment in the country’s garment segment, including job creation, more sustainable and efficient productivity and enhanced community relations. The project will take place in 12 factories that supply Western brands, including Danish fashion retailer Bestseller, according to the Danish Ethical Trading Initiative (DETI), which is coordinating the project in collaboration with the British Ethical Trading Initiative, Danish trade union 3F, and Aalborg University in Denmark, along with the support of the Danish Market Development Partnerships Fund.
DETI announced the project, to be operational till the end of 2020, supports the democratic transformation in Myanmar, including a long-term effort to increase competitiveness and strengthen respect for human and labour rights in the country’s textile and garment sector. In November 2016, the US re-designated the country as eligible for the General System of Preference program.
While US trade with Myanmar remains small, since the initial lifting of sanctions, it has grown significantly. In 2016, two-way goods trade was $438 million, with US exports totalling $194 million, having almost quadrupled since 2012, as per figures from the US Trade Representative’s Office. “The purpose of the effort is to improve the efficiency, quality and working environment of textile production, and increase knowledge of human and labour rights and social dialogue for the benefit of both social and economically sustainable development of the industry,” DETI announced. “The project’s results will be used to develop a defined business case that can be used to spread experience to companies and employees throughout the textile industry in Myanmar. At the same time, the project contributes to the UN’s World Social, Economic and Environmental Sustainable Development Strategy,” it added. Local stakeholders in the project are SMART Myanmar, Yangon Technological University and local trade unions, Industrial Workers Federation of Myanmar and UNICEF’s Multiple Indicator Cluster Survey project.
Moody's has a stable outlook for non-financial corporates in India (rated Baa2 stable by Moody's), except for telecom, which has a negative outlook. Moody's Indian affiliate ICRA has stable outlook on the passenger vehicle, construction, cement, and textiles sectors, but a negative outlook on real estate. The stable outlook is underpinned by the expectation that GDP growth of around 7.6 per cent will result in higher sales volumes, which along with new production capacity and stabilising commodity prices, will support EBITDA growth of 5 to 6 per cent over the next 12-18 months. Further, simplification of GST and other structural reforms, or improved commodity prices could result in higher EBITDA growth and provide means for deleveraging for some corporates.
Operating profitability is also expected to improve with the benefits of increased scale of execution, although this would also be sensitive to any steep rise in raw material and labour prices. Borrowing levels are expected to increase marginally to support working capital requirements with the greater scale of operations.
ICRA expects the credit profiles of domestic textile companies to remain stable. During the last 3-4 quarters, the industry witnessed multiple headwinds owing to demonetisation, the transition to GST, adverse currency movements, reductions in export incentives, sustained declines in yarn demand from China and rise in cotton prices which exerted pressure growth and profitability.
The sector's credit profile however demonstrated resilience, supported by declining aggregate debt, as the industry decreased debt-funded expansions. Favourable developments in the current year, especially an easing in cotton prices and an accommodative stance on GST/export incentives, are expected to subside growth and profitability pressures for the sector further, cushioning the impact on credit profiles.
