Zhejiang Shengtai Garment Group Co., Ltd. recently released its 2021 annual report. During the reporting period, the net profit attributable to shareholders of the listed company was approximately 291 million yuan, a decrease of 0.56% compared with the same period last year.
In the first half of fiscal year 2022, Uniqlo’s parent company Fast Retailing Group’s largest overseas market, Greater China, saw both revenue and profits decline. During the reporting period, Uniqlo’s sales revenue in Japan fell by 10.2%.
On April 18, Zhejiang Longsheng released its 2021 annual report: operating income in 2021 was 16.66 billion yuan, and net profit attributable to shareholders of listed companies was 3.374 billion yuan, a year-on-year decrease of 19.21%.
Recent financial reports released by large textile and apparel companies have shown a decline in profits. After the Spring Festival in 2022, it was supposed to be the window period for spring clothing sales. After a brief good start, the market ushered in major changes. The entire first quarter has been shrouded in the shadow of multiple outbreaks of domestic epidemics and cost pressures caused by rising oil prices. From upstream polyester raw materials to downstream weaving, printing and dyeing, or terminal clothing, the entire textile industry chain faces the risk of missing fabric orders and declining profits.
The transportation problems caused by the epidemic after March have become the biggest difficulty for traders now. Many highway exits were temporarily closed, and the problem of restricted logistics and transportation was more prominent. In addition, news of warehouse liquidation has also come from many domestic ports, especially Shanghai, where the world’s largest container port is located. This continued semi-paralysis has led to increased difficulty in shipping and continued congestion and delays. At the same time, this brings about increased transportation costs and delays in order delivery.
01
Logistics and transportation costs doubled
In terms of domestic transportation, due to the control of regions and highways, there is a shortage of drivers, which has doubled the cost and extended the transportation time. According to feedback from a trading company, since March, it has been difficult to find drivers for cargo transportation, and transportation costs have doubled. For example, the original fare for a trip was 2,500 yuan, and now it has risen to 5,000 yuan.
Spot freight rates on major routes
Naturally, the transportation fees for foreign trade orders have the greatest impact. Since the outbreak of the overseas epidemic, the fever has been high, and it has recently risen to a new height. Coupled with the closure of the Shanghai port, Ningbo port has become the only nearest shipping port in Jiangsu and Zhejiang. As a result, there has been a shortage of containers and queues for warehousing. At the same time, the sea freight is doubled and the warehousing fee has also doubled.
02
Air freight costs are staggering
In addition, as shipping capacity continues to be tight after the epidemic, freight time has been lengthened, and downstream foreign trade companies have tighter time for textile traders than in the past. For example, for a medium-to-large-scale trader in the industry, the shortest order delivery time recently is 20 days, and the longer time is around 50 days, which greatly increases the difficulty of receiving orders.
The delivery date of foreign trade orders is very important. Many customers cannot accept delays and will request air transportation. The cost of air freight is much higher than that of sea freight, and the cost pressure on trading companies is very high. A medium-sized export trader said that due to failure to deliver orders on time, there are many orders that have to be shipped by air. Since this year, he has paid 340,000 in air freight.
In less than 4 months, an additional air freight of 340,000 yuan has been incurred. What is the concept of this number! Equivalent to a year’s net profit of a small-scale trading enterprise! If there is still no significant improvement in cargo transportation and other aspects in the future, then delivery delays will continue to exist, and the air freight generated will also continue to increase. Such an expense is fatal to a small-scale enterprise, and it also has a serious impact on medium- and large-scale enterprises. As business owners say, if you don’t take orders, you can’t feed your workers, and if you take orders, you’ll continue to lose money.
In addition to facing the uncertain factor of the epidemic, the textile market will inevitably have an impact on textile production due to the continued price increase of raw materials. Since the beginning of the year, the price of textile raw materials has risen sharply, but the price of gray fabrics and finished products has been unable to keep up, causing costs to rise again and the already thin profits to become even thinner. In the off-season, raw material prices have risen to historical highs. If there is a peak season, the increase may be even more fierce.
Recently, as the domestic epidemic has been brought under control, many areas have resumed work and production, and at the same time, logistics and transportation…The sales volume has also been greatly improved, and textile companies will also begin to gradually ease their orders. However, textile workers still need to consciously control production costs and work hard to overcome this difficulty.
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