Since the beginning of this year, due to the spread of the epidemic at multiple points, rising raw material costs, sluggish demand, and the industry’s own characteristics, the development of the textile and apparel industry has been facing tremendous pressure. Overall, with efficient and stable international competitive advantages, the export growth momentum will continue based on the record high of exports in 2021; however, the domestic market is not as prosperous in the peak season and more in the off-season. The performance of most companies has been significantly affected.
In the second half of the year, the textile and apparel industry will still face pressures in terms of cost, demand, order transfer, and international situation. Industry companies must seize new opportunities in digital transformation and strive to achieve high standards in technology, fashion, and greenQualitydevelopment.
There are hidden concerns under export growth
Since the beginning of this year, external demand has generally been improving. Although some domestic provinces and cities caused a temporary decline in exports due to the epidemic lockdown, they quickly resumed work and production after the lockdown was lifted, and logistics returned to smooth flow, which reflects the strong resilience of my country’s supply chain. Data released by the General Administration of Customs shows that in the first half of 2022, the cumulative exports of textiles and clothing were US$156.49 billion, a year-on-year increase of 11.7%. Among them, clothing exports are growing particularly rapidly.
Lu Fuyong, associate professor at the National Institute for Opening-up at the University of International Business and Economics, analyzed that there are three main reasons why my country’s textile and apparel exports will maintain rapid growth in the first half of 2022. First, the international market’s demand for my country’s textile and clothing is relatively stable, and orders from major markets such as the European Union, the United States, and ASEAN have not fluctuated much. Second, my country’s textile and apparel product supply capacity is relatively good, and the export product structure can quickly adjust to international market demand. For example, due to the general relaxation of foreign epidemic control this year, my country’s exports of anti-epidemic textile and apparel products have declined, but the export of commuting and outdoor apparel products has increased significantly. quick. Third, the export unit price has increased. Affected by multiple factors such as rising global energy and raw material prices, the export price of my country’s textile and apparel products has maintained a certain growth rate.
However, the export situation of the textile and garment industry in the second half of the year is not optimistic. Since the second quarter of this year, many textile and garment factories have encountered the problem of declining export orders, especially small and medium-sized enterprises. At this stage, companies cannot receive orders, which will directly affect export data in the second half of the year.
Order volume has decreased. From a long-term trend perspective, the industry generally believes that this is a manifestation of the transfer of overseas orders to Southeast Asian countries. According to the latest estimates from the China Chamber of Commerce for Import and Export of Textiles, the scale of my country’s textile and apparel order transfers in the first half of the year was about US$6 billion. In the second half of the year, the transfer of textile and apparel orders in my country may also accelerate.
Lu Fuyong analyzed that international market demand is the most important factor supporting export growth. In addition, increasing uncertainties such as the epidemic, geopolitics, trade environment, and exchange rate fluctuations will inevitably increase international trade risks. Of course, it also depends on the supply and marketing capabilities of China’s textile and apparel export enterprises, as well as the effectiveness of relevant industrial policies.
Fortunately, since this year, our country has continued to make efforts in stabilizing foreign trade policies and measures. At a special press conference held recently by the Ministry of Commerce, Zhang Bin, deputy director of the Foreign Trade Department of the Ministry of Commerce, said that currently, foreign trade development faces high risks, difficulties, and uncertainties. The relevant person in charge said that in terms of stabilizing foreign trade in the second half of the year, the Ministry of Commerce will highlight the three major focuses of expanding volume, stabilizing stock volume, and strengthening guarantee, actively promote exports, and expand imports. At the same time, various localities are also actively introducing corresponding policies and measures to stabilize foreign trade.
There are bright spots amid the bleak domestic sales
Compared with the foreign trade sector, the performance of the textile and apparel domestic sales sector is relatively bleak. Judging from the performance warnings for the first half of the year recently announced by many listed apparel companies, the performance of many companies has dropped significantly.
“Everyone knows that the performance will not be good, but such a decline is still unexpected.” Ms. Lei, a veteran in the industry, told reporters.
Women’s clothing companies are particularly affected. Ellesi predicts that its performance in the first half of 2022 will decrease by approximately 75%; Ribo Fashion predicts that its net profit in the first half of the year will be 3.58 million yuan, a year-on-year decrease of 87.14%. Life is not easy for casual apparel companies. Peacebird expects its net profit to decrease by 68% year-on-year in the first half of the year; Meibang Apparel expects a net loss of as much as 620 million to 680 million yuan in the first half of the year.
“The domestic sales situation of textiles and clothing is not optimistic, mainly due to the relatively weak overall domestic consumption.” Lu Fuyong analyzed that the impact of the new coronavirus epidemic on our country’s economy and residents’ income in the past three years has been all-round, and residents’ spending power There has been a significant decline in consumption levels, and the rigid demand for women’s clothing, casual wear and other categories has been smaller, so the sales decline has been more significant.
Despite the overall downturn, the textile and apparel industry still has many bright spots. From a micro level, some companies have performed well. Take Bosideng as an example. It recently released its annual financial report for the 2021/2022 fiscal year. The report shows that the company achieved revenue of 16.214 billion yuan during the reporting period, a year-on-year increase of 19.95%; the profit attributable to the company’s equity shareholders increased by 20.6% year-on-year to 2.062 billion yuan; the gross profit margin increased by 1.5% year-on-year to 60.1%.
From a macro level, retail consumption has bottomed out and rebounded. According to data from the National Bureau of Statistics, in January this yearIn June, the total retail sales of consumer goods such as clothing, shoes, hats, and knitted textiles reached 628.2 billion yuan, a year-on-year decrease of 6.5%. But in June, the absolute total consumption was 119.8 billion yuan, a year-on-year increase of 1.2%.
Guosen Securities released a research report stating that it is optimistic about textile and apparel manufacturing companies with outstanding performance and the leading brand clothing brands that are the first to recover. Since June, as the epidemic has improved and domestic demand has recovered, domestic consumption has shown a good rebound trend, and head sports brands have maintained good growth. Be optimistic about investment opportunities in high-quality manufacturing companies with good performance and excellent mid- to long-term growth. The investment and financing situation in the textile and apparel industry also reflects the capital market’s confidence in the industry. According to incomplete statistics from Tianyancha, from January to July, there were a total of 6 textile and clothing financing incidents, with the financing amount exceeding 700 million yuan.
There is still huge space in the clothing market, but the premise is that it can survive first. Lu Fuyong believes that for most textile and apparel products with non-rigid demand, it is difficult for companies to reverse consumer market demand. Some companies have improved the pertinence of their products through supply-side reforms, such as adding professionalism, functionality, and scenario-based design, thereby increasing consumer demand. The scenario-based reform of online sales models has also ensured the sales channels of clothing companies.
Digitization brings new opportunities
In June, the consumer markets of major economies declined. The World Bank, World Trade Organization and other institutions lowered their forecasts for world economic and trade growth. In the second half of the year, the textile and apparel industry may face relatively weak demand in both international and domestic markets, and various uncertainties may increase.
The global economic recovery is not optimistic. Small and medium-sized enterprises must strengthen self-help, reduce costs and increase revenue. Lu Fuyong suggested that export companies need to work hard on both the supply side and the sales side. On the supply side, we must not only optimize product supply structure and quality, but also reasonably arrange the supply rhythm, attach great importance to international logistics trends, optimize supply chain adjustment capabilities, and reduce production costs. On the market side, we need to fully explore emerging markets. For example, the export growth of the Latin American market in the first half of this year was very significant. We can take advantage of the new advantages of trade agreements such as RCEP to actively explore new markets.
For the domestic market, Lu Fuyong said that the transformation of textile and garment enterprises is mainly towards specialization, scenario-based, branding, etc., and more attention is paid to the design and quality control of the supply side to highlight the recognition of products and thereby enhance consumer awareness. Brand loyalty and recognition. At the same time, the development trend of enterprise grouping is also relatively obvious. Comprehensive textile and garment enterprise groups are better able to integrate the production and marketing advantages of various categories to form strong comprehensive competitiveness.
Faced with the new situation, the Ministry of Industry and Information Technology and other departments have recently issued the “Digitalization to Support the “Three Products” of the Consumer Goods Industry (2022-2025)” (hereinafter referred to as the “Action Plan”), aiming to promote the consumer goods industry by Enhance the integration and application capabilities of digital technology and further promote the “three products” strategy during the “14th Five-Year Plan” period to a new level.
In this regard, Sun Ruizhe, president of the China Textile Industry Federation, said that the introduction of the “Action Plan” has enabled the textile industry to better implement new development concepts and Integrating into the new development pattern and realizing high-quality development of technology, fashion, and green will bring new opportunities. To implement the Action Plan, the textile industry should focus on three aspects: first, improve the industrial ecology and build digitalization into a new fulcrum for coordinated development and collaborative innovation of the industry; second, improve basic capabilities and build digitalization into a stable and healthy industry A new fulcrum for development; the third is to expand application scenarios and build digitalization into a new fulcrum for leveraging the domestic market and smoothing the dual cycle.
The full-scenario and professional application of digital technology has become an inevitable trend in the textile and apparel industry, and has also opened up a new segmentation track for the industry. Recently, Shenzhen Suying Technology Co., Ltd., which specializes in providing intelligent sewing solutions, completed an angel round of financing of over 10 million yuan. The investor in this round is Sinovation Ventures Frontier Technology Fund. The financing will be used for product research and development and customer verification. Ren Bobing, executive director of Sinovation Ventures and general manager of Frontier Technology Fund, said that under the pressure of rising labor costs and “labor shortage”, industrial automation has become a special medicine for my country to continue to maintain its status as the “world’s factory”.
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