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By Victoria Waldersee and Ruma Paul
LISBON/DHAKA, Feb 8 (Reuters) - Clothes retailers in Europe
and America sit on excess inventory and cut back on spring
orders. Sourcing agents face late payments. Garment factories in
Bangladesh are on the rack.
The global apparel industry, reeling from a punishing 2020,
is seeing its hopes of recovery punctured by a new wave of
COVID-19 lockdowns and patchy national vaccine rollouts.?
Some major retailers are still nursing last year's clothes,
which would have been sold off in clearance sales in normal
times. British chain Primark, for example, told Reuters it was
housing around 150 million pounds ($205 million) worth of 2020
spring/summer stock and 200 million pounds from autumn/winter.
In an indication of the scale of the backlog, consultancy
McKinsey says the value of unsold clothing worldwide, in stores
and warehouses, ranges from 140-160 billion euros ($168-192
billion) - more than double normal levels.
Britain's Marks & Spencer and Germany's Hugo Boss
? said they had placed smaller orders than usual for
this year's spring collection.
Retailers are keeping volumes small and lead times tight,
according to Ron Frasch, former president at Saks Fifth Avenue
who is now operating partner at private equity firm Castanea
Partners, which works with a number of apparel brands.
"Most of the brands now are pretty tight on shipping and the
factors are very tight. I think everyone was very conservative
with their purchasing," he said. "I know many have been slow
paying. That is for sure."
Indeed, Hong Kong-based sourcing agent Li & Fung, which
manages more than 10,000 factories in 50 countries for retailers
including global players, told Reuters that some retailers had
requested later payment terms, but declined to provide
specifics.?
FACTORIES FEEL THE PAIN
The pain is consequently flowing to? major garment
manufacturing centres like Bangladesh, whose economies rely on
textile exports. Factories are struggling to stay open.
Fifty factories surveyed by the Bangladesh Garment
Manufacturers and Exporters? Association said they had received
30% fewer orders than usual this season, as pre-Christmas
lockdowns in much of Europe followed by another clampdown in
January hit their businesses hard.
"Orders usually arrive three months in advance. But there
are no orders for March," said Dhaka-based factory owner
Shahidullah Azim, whose clients include North American and
European retailers.
"We are operating at 25% of capacity. I have some orders to
run the factory till February. After that, I don't know what
future holds for us. It's difficult to say how we will
survive."?
Miran Ali, who represents the Star Network, an alliance of
manufacturers in six Asian countries, and himself owns four
factories in Bangladesh, faces similar problems.
"At this point in time, I should have been entirely full
until March at least, and looking at a healthy quantity for
autumn/winter coming in already. Across the board, that is
coming slow," he told Reuters from the capital Dhaka.
"Brands are buying less from fewer people."
Asif Ashraf, another factory owner in Dhaka who makes
clothes for global retailers, said it was tough to adjust.
"We've produced the fabric and we're ready to stitch the
garments, but then they say the order is on hold."
'PUBLIC WEARING PJs AGAIN'
With store closures threatening to carry into summer, some
retailers are attempting to sell off as much of their excess
stock as possible before placing new orders, textile recycling
firm Parker Lane Group told Reuters.
CEO Raffy Kassadjian said his business went from processing
an average of 1.5 million items of excess apparel per month to
over 4 million in January, its busiest month ever.
Last year was dire for the clothing industry, which saw
sales slide by about 17% versus 2019, according to Euromonitor.
And the future is uncertain.
Estimates for 2021 range from pessimistic forecasts of a 15%
sales drop from McKinsey, to an 11% recovery from Euromonitor.
So are there bright spots? Well, a lockdown pyjama boom is
offering some minor relief.
"If you want to know what the Great British public is doing
- it's wearing pyjamas again," Marks & Spencer CEO Steve Rowe
said last month, while Hugo Boss alluded to the same phenomenon,
saying it had "streamlined our range of classic business
clothing and expanded the range of casual wear".
But that's cold comfort for some factory owners.
"Demand for pyjamas is at a life-time high," Ali in Dhaka
acknowledged. "But not everyone can make pyjamas!"
($1 = 0.7325 pounds; $1 = 0.8315 euros)
(Reporting by Victoria Waldersee in Lisbon and Ruma Paul in
Dhaka; Additional reporting by Melissa Fares in New York, Anneli
Palmen in Duesseldorf and James Davey in London; Editing by
Vanessa O'Connell and Pravin Char)
