What recovery? Clothing retailers cut orders as factories struggle to survive By Reuters

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5/5 © Reuters. Garment employees work in a sewing section of Fakhruddin Textile Mills Limited in Gazipur 2/5

By Victoria Waldersee and Ruma Paul LISBOA / DHAKA (Reuters) – Clothing retailers in Europe and the United States have excess inventory and cut spring orders. Procurement agents face late payments. Garment factories in Bangladesh are on the shelf. The global apparel industry, reeling from a punishing 2020, sees its recovery hopes punctured by a new wave of COVID-19 lockdowns and spotty domestic vaccine launches. Some major retailers are still looking after last year’s clothing, which would have been sold for clearance in normal times. British chain Primark, for example, told Reuters it held about 150 million pounds ($ 205 million) in spring / summer 2020 shares and 200 million pounds in autumn / winter. In an indication of the scale of the accumulation, consulting firm McKinsey says that the value of unsold clothing worldwide, in stores and warehouses, ranges from 140-160 billion euros ($ 168-192 billion), more than double normal levels. Britain’s Marks & Spencer (OTC 🙂 and Germany’s Hugo Boss said they had placed smaller orders than usual for this year’s spring collection. Retailers are keeping volumes small and delivery times tight, according to Ron Frasch, former president of Saks Fifth Avenue, who is now an operating partner at private equity firm Castanea Partners, which works with several clothing brands. “Most of the brands are now quite tight on shipments and the factors are very strict. I think they were all very conservative with their purchases,” he said. “I know many have paid slowly. That is for sure.” In fact, Hong Kong-based sourcing agent Li & Fung, which runs more than 10,000 factories in 50 countries for retailers, including global players, told Reuters that some retailers had requested subsequent payment terms but declined. to provide details. FACTORIES FEEL THE PAIN As a result, pain is reaching major garment manufacturing centers such as Bangladesh, whose economies depend on textile exports. Factories are struggling to stay open. Fifty factories surveyed by the Bangladesh Garment Manufacturers and Exporters Association said they had received 30% fewer orders than usual this season, as pre-Christmas closures across much of Europe followed by another crackdown in January hit their businesses hard. business. “Orders generally come in three months in advance. But there are no orders for March,” said Dhaka-based factory owner Shahidullah Azim, whose clients include North American and European retailers. “We are operating at 25% capacity. I have some orders to operate the factory until February. After that, I don’t know what future holds for us. It is difficult to say how we will survive.” Miran Ali, who represents the Star Network, an alliance of manufacturers in six Asian countries, and who owns four factories in Bangladesh, faces similar problems. “Right now, it should have been completely full until at least March, and I’m already seeing a healthy amount for fall / winter. Overall that’s coming slow,” he told Reuters from the capital Dhaka. “Brands buy less from fewer people.” Asif Ashraf, another owner of a factory in Dhaka that makes clothing for global retailers, said it was difficult to adapt. “We have produced the fabric and are ready to sew the garments, but then they say the order is on hold.” ‘PUBLIC USE PJs AGAIN’ With store closures threatening to drag into the summer, some retailers are trying to sell as much of their excess stock as possible before placing new orders, textile recycling company Parker Lane told Reuters Group. CEO Raffy Kassardjian said his business went from processing an average of 1.5 million excess garments per month to more than 4 million in January, his busiest month. The past year was terrible for the garment industry, which saw sales drop by roughly 17% compared to 2019, according to Euromonitor. And the future is uncertain. Estimates for 2021 range from pessimistic forecasts of a 15% sales drop for McKinsey, to an 11% recovery for Euromonitor. So are there any bright spots? Well, a low-key pajama boom is offering minor relief. “If you want to know what the general British public is doing, put your pajamas back on,” Marks & Spencer CEO Steve Rowe said last month, while Hugo Boss alluded to the same phenomenon, saying he had “optimized our range classic business clothing and expanded the range of casual clothing. ” But that is cold comfort to some factory owners. “The demand for pajamas is at an all-time high,” acknowledged Ali in Dhaka. “But not everyone can make pajamas!” ($ 1 = 0.7325 pounds; $ 1 = 0.8315 euros) (This story corrects the dropped letter in the name of Raffy Kassardjian).