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The Council for the Development of Cambodia (CDC) has approved three garments projects worth a combined $7 million. They are expected to create some 1,820 jobs. All three projects highlight continued attractiveness for investors into the Kingdom.
Among the green-lighted ventures approved by the CDC includes a project by MIL United Manufacturing with a capital investment of $2.3 million in Kandal’s province Kandal Stung district. The rest are Jin Ming Li Jian One with capital investment $2.3 million in Kampong Spue’s province Kong Pisey district and the Suzen (Cambodia) Industrial with $2.4 million. It will build a factory in Tbong Khum province’s Suong Town municipality. There are now a total of 1,730 factories operating in the Kingdom.
During the first eight months of last year, the CDC approved 222 projects worth more than $6 billion, an increase of 81 projects worth $1.88 billion in the same period in 2018.
CDC continues to receive applications for new projects despite recent challenges to the local economy, such as the EU’s partial cancellation of Cambodia’s Everything But Arms (EBA) scheme and the global outbreak of the novel coronavirus.
Fitch Ratings has cut India's growth forecast to 5.1 per cent for fiscal 2020-21, with COVID-19 pandemic likely to hit business investment and exports. It had projected India's growth at 5.6 per cent for 2020-21 last December. In its Global Economic Outlook, Fitch said the number of infected will rise but the outbreak will remain contained.
The agency states, supply-chain disruptions are expected to hit business investment and exports. GDP growth is likely to remain broadly steady at 5.1 per cent in the fiscal year 2020-2021 following growth of 5.0 per cent in 2019-2020. While India’s linkages with China are modest, manufacturers in India are heavily reliant on key Chinese intermediate inputs, especially of electronics and machinery and equipment.
The difficulties facing Indian economy have been exacerbated by Yes Bank failure. Fragilities in the financial system will further undermine sentiment and domestic spending. The overall financial system remains burdened with weak balance sheets, which will limit any upside to credit and growth despite policymakers'' efforts in recent months to ease stresses.
Affected by COVID-19, the market for direct-spun PSF decreased more slowly, so its cash flow was considerable. Upon high cash flow of direct-spun PSF, downstream buying interest was thin though the price has declined below 6,000yuan/mt. Downstream expected prices to move down to about 5500yuan/mt. However, direct-spun PSF plants did not show strong willingness to undersell with low inventory. In addition, as crude oil and polyester feedstock rebounded and tended stable, downstream plants more intended to go bottom fishing, but with adequate stocks of raw materials and high spot price, operation by futures mode appeared.
Currently, only a few plants operated by futures, and they were centered on May-Jul contracts. Take May contracts as an example. May direct-spun PSF futures price = May polyester feedstock futures price + (1200~1300)yuan/mt.
For direct-spun PSF plants, they gained mixed profits due to different processing costs. The processing cost of some old plants including water, power, labor and so on was at about 800-900yuan/mt without depreciation, while that of those which were put into operation within 10 years was mostly at 1,000-1,200yuan/mt.
From the perspective of downstream spinners, the futures price was about 5500yuan/mt or lower, indicating more opportunities than risks. In particular, as the recycling of re-PET was difficult, re-PSF price moved up close to direct-spun PSF price, thus downstream spinners shifted to use direct-spun PSF in production increasingly, which was a good opportunity for direct-spun PSF to squeeze re-PSF despite the tough year. Therefore, the demand for direct-spun PSF was relatively optimistic.
On the other hand, some plants did not want to adopt this operation as customers were mostly sensitive to price and they may not have high loyalty. Therefore, they did not want to adopt this operation.
Crisil has cut India’s base-case gross domestic product (GDP) growth forecast for fiscal 2020-21 to 5.2 per cent from 5.7 per cent. The new assessment factors in the huge uncertainty because of COVID-19, with risks to the forecast tilted downwards. The forecast will be reassessed continuously as new information comes in.
A serious downside to the rating agency’s base case can emerge from two developments. One, the pandemic is not contained by April-June 2020 globally, and makes the global slowdown more severe. And two, it spreads rapidly in India, affecting domestic consumption, investment, and production. These would further hurt confidence and the financial markets, CRISIL said in a press release.
In any case, India has little policy firepower to give a meaningful push to growth, and the pandemic is making it more difficult. While there will be steeper deceleration in global growth and India’s trade, what is unclear is the extent of impact on economy through domestic channels of production (supply) and consumption (demand).
The answer would depend largely on the extent of spread within India. So far, India is among the Asian economies that aren’t deeply impacted
China Lilang, a prominent menswear manufacturer and retailer from China, fears 2020 could be contradictory to what 2019 was as far as sales are concerned. The menswear brand saw an impressive surge of 15 per cent in sales last year touching $515.78 million. Amidst huge store expansions all through 2019, many outlets were relocated as a part of business strategy to enhance its exposure to customers.
China Lilang opened, on an average, 3 stores every week in 2019. Its profit from operation increased to $138 million (11.1 per cent), net profit touched $ 114.5 million last year, which is a jump of a little over 8 per cent. However, the retailer is worried about 2020. The Coronavirus has hit the sales in a big way, which may force it to bring down the production of Autumn 2020 items so as to help outlets destock Spring inventories.
The CFDA and 90 business groups including the National Retail Federation, Accessories Council, and Fashion Footwear Association of New York have brought their concerns to the White House, sending a letter to President Trump calling for economic stabilisation efforts amidst the Coronavirus pandemic.
The letter commends the administration and Congress for their public health efforts and actions to minimize the economic fallout caused by the spread of the virus. It goes on, however, to state: The economic harm from social distancing and mandatory store closures will surely be followed by layoffs and economic hardships. The biggest single issue facing the industry right now is liquidity, and federal stimulus efforts must be swift and flexible enough to address the urgent need for access to credit to keep these businesses afloat.
The letter concludes by encouraging policymakers to develop proposals that support the retail workforce and to provide a “bridge” for retail businesses of all sizes to stay viable during the crisis.
To help prevent the further outbreak of the COVID-19 epidemic, all global retailers like Glossier, Nike, Urban Outfitters, and Patagonia have indefinitely shut their stores. They have also updated their working policies to ease the strain on their staff. For instance, Starbucks has introduced a ‘catastrophe pay’ scheme for its US employees, by which, the retailer will pay staff for upto 14 days if they are diagnosed or have been in contact with someone suffering from Coronavirus.
Consumers switch to online shopping
During this week, with most of retailers shutting stores, e-commerce sales have surged by a staggering 71 per cent. However, most of this surge is restricted to categories like garden furniture, crafting, etc. Fashion sales, on the other hand, have dipped. American expenditure on fashion has declined as instead of fashion merchandise, Americans are preferring to stock essential goods.
The situation is similar in other markets too, in China, sales of household staples such as rice and flour have quadrupled on JD.com since the same period the previous year. In the UK, supermarkets, online grocery delivery slots have sold out for the next three weeks at least.
Though these ecommerce retailers may benefit in the short-term, they are likely to face issues relating to stock and supply chain in future. Hence, it would
be important for them to quickly invest in order to meet demand.
An opportunity for omni channel retailers
Closure will also have a big impact on the revenues of brick and mortar retailers like Primark. However, it would provide omnichannel retailers with an opportunity to shift their focus to ecommerce.
For the most in-demand online retailers, delays or disruption in deliveries could negatively impact their brand’s reputation or loyalty in both the short and long term. Earlier this month, Amazon warned customers deliveries would be slower than usual, and since, there have been complaints that certain categories are continuously out-of-stock.
Being customer-friendly
Going forward, retailers need to be both transparent as well as vocal about how they are approaching the situation. A majority of retailers have been sending out marketing emails in order to address how they are handling the situation. However, they also need to be responsive on social media and other digital customer support channels.
These e-commerce retailers also need to adopt the practice of ‘no-contact deliveries whereby delivery workers leave packages at the door. Indeed, some of them are seen to be taking proactive steps to help and protect their consumers. For example, Louis Vuitton owner, LVMH, has begun to use its perfume production lines to make hand sanitisers, which the brand is sending out to hospitals in France. Elsewhere, retail stores are precautionary measures like going cashless or staggering entries.
Marks & Spencer has recorded substantial sales declines in clothing and home business due to the Coronavirus outbreak. The brand’s forecast for group pre-tax profit (PBT) for the quarter to date has been adversely affected by the virus but was within the range of market expectations and in line with the guidance issued in January until the current week”. The final result could be at or below the bottom end of the range of PBT of £440m-£460m, given probable very depressed trading in Clothing and Home.
The brand is now planning on the basis of a prolonged downturn in demand for clothing and home and may close some of stores temporarily. This dent to the clothing and home business is expected to last, at least, for three or four months into the new financial year, although it's possible that this may ease as summer trading gets under way. Its margins are likely to be severely impacted by the surplus of unsold seasonal stock and probable clearance activity in the marketplace.
The company has welcomed the UK government’s support on business rates as it paid out around £180 million for those property taxes in the UK last year. It's working to cut costs by postponing capital spending, deferring all pay increases and deferring or cancelling discretionary spend. That includes reducing its marketing spend. It's also reducing the supply pipeline by over £100 million and working to grow its online penetration.
Vietnam garment makers are struggling as EU and US buyers are cancelling orders over the Covid-19 crisis. A French company recently canceled orders placed with garment maker TNG over the spread of the novel coronavirus in France. Now about 200 containers that were supposed to go to the E.U. and the U.S. will remain in the country by the end of next month, each of them worth around $100,000.
Garment company Than Duc Viet might have to stop some production chains because U.S. buyers have delayed their orders. Its sea shipments in March have been postponed to April and May, and buyers have asked to stop the ongoing production of hundreds of thousands of products.
COVID-19 has already been a blow for Vietnam’s textile industry with producers struggling to source materials from China as factories there were shut down by the virus. Now that the supply chain has mostly been resumed, the industry faces the problem of selling to the E.U. and the U.S. where buyers have stopped ordering.
The EU on March 17 closed its borders for 30 days to contain the disease. Although the ban does not apply to goods, Vietnamese officials expect exports to the bloc to fall by up to 8 per cent in the first and second quarter due to lower demand.
Latest research by Panjiva, the supply chain intelligence unit of the impact of Voronavirus has led to brand’s diversifying their supply chain to newer countries. Levi Strauss and Adidas have increased their imports from Cambodia while Uniqlo parent Fast Retailing has moved sourcing to Vietnam. Ralph Lauren’s import mix has also changed over the past two years, with its seaborne imports declining to 25.4 percent of the total in 2019 versus 34.6 percent in 2018.
The same was also true in consumer staples, where membership warehouse club Costco Wholesale Corp. outperformed the sector by 16.5 percent with 0.29 TEU per million COGS and 0.09 percent reported Asian exposure. Data also showed imports from Asia fell 10.7 percent year-over-year in the three months ended Feb. 29, 2020. Pricesmart Inc had zero per cent reported Asian exposure, but it underperformed the sector by a negative 13.3 percent. That’s because its Asian supply chain exposure was much higher, at 1.43 TEU per million COGS.
Panjiva believes that using containerised freight imports, as measured by TEUs, from Asia against a neutral measure of a company’s supply chain is a more nuanced measure across an apparel company’s business.
