Vietnam’s Ministry of Industry and Commerce recently stated that most Vietnamese textile companies have received production orders for the third quarter or October. However, since the middle of the second quarter, inflation in major export markets such as the United States and the European Union has remained high, and the number of new orders has slowed since the middle of the second quarter. As a result, the growth trend of the industry has shown signs of slowing down, and profits in the second half of the year are likely to decline. decline.
Although the order visibility of domestic garment factories has reached October, due to high inflation in Europe and the United States suppressing consumer demand, international clothing brands have begun to reduce new orders and will The order cycle is shortened from 6 months to 3 months to prevent the order cycle from being too long and causing the inventory level to be too high.
A Dong Nai company specializing in the production of children’s clothing used to receive 80,000-100,000 new clothing orders from American partners every month.
Cai Ming, manager of the company, said that the number of new orders has dropped sharply by 20-30% in the past two months. She said that if the inflation problem in the United States remains serious and will not improve in the short term, it will force people to reduce spending on non-essential goods. Therefore, the company is promoting its products to Canada and Mexico, which have many similar consumer characteristics, in order to win new orders.
The main reason for the decrease in textile and apparel orders is the slowdown in consumption in large markets, especially the United States and the European Union, in the second half of 2022 and early 2023, the increase in importer inventories, and the relatively high inflationary pressure. high.
Vietnam Textile and Apparel Group (Vinatex) and Vinh Viet Securities Company (VDSC) predict that textiles will decline in the second half of the year as excessive buying and inflation prompt the non-industrial sector to tighten their belts. Clothing demand will decrease.
In addition, under the dual impact of supply chain disruptions and the Russia-Ukraine conflict after the epidemic, the prices of raw materials in the textile industry, especially fabrics and cotton, rose by about 10%. Industry insiders also said that labor shortages, rising transportation costs, and rising fuel prices after the epidemic have led to rising labor costs, which will have a negative impact on the entire textile and apparel supply chain from manufacturers to retailers.
When the euro depreciates against the dollar, textiles will also be indirectly affected. The euro fell to its lowest in 20 years last week and is roughly on par with the dollar, which has soared this year amid global economic uncertainty. Vinatex general manager Gao Youxiao said the weaker euro will reduce profit margins for buyers from EU countries.
VDSC predicts that as new orders shrink, Vietnam’s textile and garment industry profits will be hit hard in the second half of the year. Some apparel companies have adjusted their operating performance targets for this year.
Song Hong Garment Jsc estimated its pre-tax profit at VND500 billion (US$20.83 million), an 8% annual decrease.
