As the 2021 semi-annual reports are released one after another, some listed clothing companies are happy and some are sad. The “distress” of some clothing companies is clearly visible, and the “inventory crisis” that has long plagued the development of the industry is still spreading.
With fabric inventory of 613 million and clothing inventory of 1.582 billion, well-known clothing brands have suffered performance failures.
On the evening of July 15, Souyute Group Co., Ltd. issued a revised performance announcement for the first half of 2021. The net profit attributable to shareholders of listed companies in the first half of the year is expected to be -1.35 billion. to -900 million yuan, a year-on-year decrease of 2703.88% to 4005.82%, turning from profit to loss; earnings per share ranged from -0.4400 to -0.2900 yuan.
As for the reasons for the change in performance, Sou Yute explained: First, due to the impact of the epidemic and tight financial liquidity, the company’s supply chain business and brand The sales revenue and gross profit of the apparel business were lower than expected, resulting in a decline in profits; second, the company’s capital liquidity is tight. As of June 30, 2021, the company has experienced multiple overdue debts and resulted in multiple lawsuits and arbitrations. In order to repay interest, In order to pay supplier payments, warehouse rental fees, wages and other production and operating expenses, the company plans to further carry out vigorous price reduction promotions on the raw material cloth with a book balance of 613 million yuan and clothing inventory of 1.582 billion yuan on the original basis to quickly withdraw funds. This is expected to increase inventory depreciation provisions by 1.0-1.15 billion yuan.
For clothing companies, inventory has always been one of their main pain points. Product backlog not only occupies the company’s operating funds, but also increases the company’s management costs and profit costs, lengthens the product turnover cycle, thereby reducing the company’s overall profits. For huge inventories, closing poorly operating stores and offering discounts and promotions have become the traditional methods for most clothing companies to destock. An executive from a clothing company who did not want to be named said frankly: “At present, it takes a long time for clothing companies to digest these inventories, but profit support is needed to sell the inventory. Once the financial statements look ugly, banks will follow behind to collect debts. Therefore, More and more clothing companies are entering the inventory cycle.”
Long-term industry Inventory backlog is a disaster for the brand itself and the market
Due to the prolonged inventory turnover days, companies must pay for warehousing costs and human management costs. In this way It also increased operating costs during a period of declining profits. At the same time, cash flow is also under pressure, funds are difficult to recover, and the survival of enterprises is facing a crisis.
Textile and clothing are closely related industries. If the terminal stock is not sold in time, it will directly affect the development of the textile industry. Fabric merchants lack large-volume orders, and weaving manufacturers are slow to deliver goods, resulting in gray fabric inventory. Further down the line, the continued decline in the value of raw materials has caused pressure on raw material production.
It is understood that from January to May this year, textile and clothing exports totaled approximately US$96.2 billion, a year-on-year decrease of 3.44%. Among them, textile yarns, fabrics and products have achieved year-on-year growth in May. The high growth of 77.34% is mainly due to the fact that the domestic epidemic has been effectively controlled since March. Domestic textile enterprises have basically resumed work, export orders have been completed and exported before the Spring Festival, and the growth in exports of anti-epidemic supplies (masks, etc.) has driven high growth in textile exports. However, as the overseas epidemic is still severe, foreign consumer demand for clothing is weak, and many international brand offline stores have closed. Clothing and clothing accessories fell by -26.93% year-on-year.
The textile market is not as good as imagined. A large number of market orders are hoarded, which may overdraft future market demand!
From the perspective of the recent textile fabric trade, although there is an increasing trend in orders, according to feedback from many market personnel, the current orders are mainly based on “spot market orders”. The large number of orders in this part will create an extremely busy scene in the market in a short period of time. However, the corresponding normal orders are currently mediocre. Most of the orders in this part of the market are due to stocking speculation after the increase in raw materials, and the same will happen. Market demand behind overdraft.
On the other hand, and the most important point is that the sales situation of fabrics is not optimistic. The peak season market in the first half of this year was not as good as in previous years, and the performance of fabric orders in the off-season was even worse. Good, except for some autumn and winter fabrics that are selling well, other products are difficult to sell. Without orders, weaving companies lack the courage to raise prices no matter how high the cost is. “The price of raw materials has increased recently, but we don’t have any orders and dare not raise the price with our old customers for fear that the customers will run away,” said a person in charge of a weaving company. The domestic epidemic has basically ended this year, but the textile foreign trade market does not seem to be improving. Repeated overseas epidemics, shipping costs, international relations, and high textile and clothing inventories last year have made it difficult to receive foreign trade orders.
For those clothing companies whose products are not very competitive and have poor differentiation capabilities, the onset of inventory pressure may be a severe test. In the future, if inventory factors cannot Effective relief, clothing companies with inventory collapse may bring down traders and weaving companies. No matter what the situation is, in short, there is a long way to go to digest inventory.Integrity is the top priority of the current textile industry chain. </p
