The COVID-19 epidemic has impacted various sports events and private consumption around the world. Baocheng, which manufactures for internationally renowned sports shoe brands, has responded by cutting senior management salaries, implementing unpaid leave, and closing factories. Taipei has reduced the leased area of its Vietnam factory; sportswear OEMs have also been affected. Orders from brand customers have been frozen rapidly, and they can only wait for inventory to be digested and customer orders to return after the epidemic eases.
The new crown epidemic has forced the postponement of the 2020 Tokyo Olympics. Major sports events such as Major League Baseball, NBA, and European football have also been completely suspended, coupled with the city lockdown The effect affects consumer demand, and the global sports industry is facing an unprecedented negative impact. Adidas, a well-known international sports brand, recently announced that its first-quarter revenue fell by nearly 20% annually. Due to the impact of the epidemic, it is expected that the annual decline in the second quarter may reach 40%.
Affected by the order reduction of brand customers and the closure of downstream channels, Baocheng has announced that it will implement unpaid leave from June to the end of the year. Senior executives above the deputy general manager level From May to December, wages were reduced by 10-30%, and the company also took unpaid leave as planned. This week it was confirmed that the Hubei factory will be closed and the company will coordinate with customers to transfer production.
Baocheng’s business scale has significantly expanded since 2014. In 2015, except for the Lunar New Year month, its monthly revenue was more than NT$20 billion; In 2016, excluding the Lunar New Year, the lowest single-month revenue was still more than 21.3 billion yuan; in 2017 and 2018, it remained at a similar level. In 2019, excluding the Lunar New Year, the lowest single-month revenue was more than 25.1 billion yuan.
However, due to the impact of the epidemic this year, the sports industry has froze. In April, Baocheng’s consolidated revenue was 21.28 billion yuan, a new low for the same period in the past six years and higher than last year. During the same period, it decreased by 21.7% to 27.182 billion yuan. According to Baocheng statistics, consolidated revenue in the first four months of this year was 80.74 billion yuan, a decrease of 22.2% from 103.811 billion yuan in the same period last year, and also a new low for the same period in the past six years.
Fengtai stated that following the original board resolution on May 14, 2019, its subsidiary Vietnam Dona Standard Footwear Co., Ltd. leased land in Nanhe Small Industrial Zone, Vietnam, with an area of 485,562 square meters of land. In response to the impact of the COVID-19 epidemic, the board of directors decided to reduce the leased area to 154,409 square meters on May 6, which is less than 1/3 of the original planned lease.
The textile industry has also been obviously affected by this wave of epidemic. Hong Zhenhai, chairman of Ruhong, said frankly at the beginning of the legal briefing that “the last legal meeting was overly optimistic.” He said that due to the impact of the epidemic, many European and American customers have stopped working one after another, and orders have been frozen rapidly since late March. “Some customers have canceled orders, and some have postponed orders.”
As for the performance of the second quarter, although Ruhong estimates that May and June are expected to recover compared with April, the delay in customer orders has not changed, and some deferred orders have reached The third and fourth quarters have even been postponed to the first quarter of next year at worst. Currently, more than 10 million pieces of ready-made clothing have been delayed in shipment. “Overall, it is impossible to grow in the second quarter.”
Hong Zhenhai believes that “the suspension of consumption in one quarter will affect the second quarter.” Downstream customers are bound to consume inventory, and the performance in the third quarter may continue to be weak. Observing Ruhong’s major customers, the order decline rate for Nike and Lululemon in the third quarter was about 30-40%. Hong Zhenhai said that except for Nike and Lululemon, the vast majority of customers delayed payment, even up to 120 days.
Hong Zhenhai said that in the face of uncertainty about the epidemic, we need to wait one month after the United States announces the lifting of the blockade, and then observe the market buying momentum and customer inventory levels. ization situation, order visibility can be expected to be clear. The progress of the Indonesian factory construction plan remains unchanged, but the scale of the production lines will be halved. 60 production lines will be completed first. The next step will be considered based on the order structure in the future.
Facing the impact of the epidemic, textile factory Hongyuan’s spokesman Xiang Wengui said that the company proposed to allow employees to take special leave in the new year in advance and take sick leave without affecting full attendance. There are two plans to pay bonuses and year-end bonuses to maintain employees’ livelihood; currently, there are neither unpaid leave nor layoffs.
Hongyuan pointed out that European and American countries have implemented city closures, which has suppressed demand and consumption momentum. Clothing brands including Nike, Lululemon, Adidas and other apparel brands have either cut orders or postponed orders. It is estimated that the performance in May will be the lowest for the whole year, and it is expected to rebound from June and improve quarter by quarter, but it will ultimately depend on the epidemic situation.
Overall, Baocheng and Fengtai have taken last resort measures in response to the epidemic, but industry players said that even if major sports events are temporarily suspended, the shoemaking industry is still facing orders Although the situation has been significantly reduced, the aviation and tourism industries, which have been hit hard by the epidemic, are doing well. They still hope to control the epidemic this year, gradually return to normal operating levels, and usher in the business opportunities of the one-year postponement of the Olympic Games.
Shoe material factory Baihe pointed out that due to the impact of the epidemic, the global economy has shown signs of stagnation to a certain extent, the consumer market is sluggish, and shoe factory orders have decreased. It may not decrease; but we are optimistic that the demand will still exist after the epidemic. Factory reconstruction projects that are almost completed will be built, and more than half of them will be continued.
Shoemaking factory Yuqi, whose consolidated revenue in April fell by more than 50% year-on-year, expects that the epidemic will eventually cool down around the world and the lockdown will be gradually lifted in stages, and the economy will Activities will also return to normal, but a balance between economic and epidemic prevention and control still needs to be struck. Operations in the next few months will depend on the performance of the end consumer market, the effectiveness of epidemic control, and the economic activities of various countries.Depends on the degree of restart.
