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What recovery? Clothes dealers are cutting orders while factories struggle to survive

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© Reuters. Apparel workers work in a sewing department at Fakhruddin Textile Mills Limited in Gazipur

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By Victoria Waldersee and Ruma Paul

LISBON / DHAKA (Reuters) – Clothing retailers in Europe and America have excess inventory and are reducing spring orders. Sourcing agents face late payments. Garment factories in Bangladesh are on the shelf.

The global apparel industry, hit by a 2020 penalty, sees its hopes of recovery from a new wave of COVID-19 lockdowns and patchy national vaccine launches.

Some major retailers still stock last year’s clothing that would have been on sale in normal times. For example, the UK chain Primark told Reuters that it had around £ 150 million ($ 205 million) worth of stocks in Spring / Summer 2020 and £ 200 million in Fall / Winter.

In a reference to the extent of the backlog, consulting firm McKinsey says the value of unsold clothing in stores and warehouses around the world is between 140 and 160 billion euros – more than double what it is normal.

The British Marks & Spencer (OTC 🙂 and the German Hugo Boss stated that they had placed smaller orders than usual for this year’s spring collection.

Retailers keep volume small and lead times tight, according to Ron Frasch, former president of Saks Fifth Avenue, who is now an operational partner of private equity firm Castanea Partners, which works with a number of apparel brands.

“Most of the brands are pretty tight on shipping now and the factors are very tight. I think everyone has been very conservative when shopping,” he said. “I know a lot of people paid slowly. That’s for sure.”

Hong Kong-based procurement agent Li & Fung, which manages more than 10,000 factories in 50 countries for retailers including global players, told Reuters that some retailers have requested later payment terms but have refused to provide details.

FACTORIES FEEL THE PAIN

The pain consequently flows to large garment manufacturing centers such as Bangladesh, whose economies depend 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 across much of Europe, followed by another clampdown in January, kept their businesses tough hit.

“Orders usually come in three months in advance, but there are no orders for March,” said Shahidullah Azim, a Dhaka-based factory owner whose clients include North American and European retailers.

“We’re 25% busy. I have a few jobs to keep the factory running until February. After that, I don’t know what the future holds for us. It’s hard to say how we’ll 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 I should have been full at least until March and had to look at a healthy amount for autumn / winter. All along the line, this is going slowly,” he told Reuters from the capital Dhaka.

“Brands buy less from fewer people.”

Asif Ashraf, another Dhaka factory owner that makes clothing for global retailers, said it was difficult to adapt. “We have made the fabric and are ready to sew the garments, but then they say the order is on hold.”

‘PUBLIC WEARING PJs AGAIN’

With stores looming to close this summer, some retailers are trying to sell as much of their excess inventory as possible before placing new orders, textile recycling company Parker Lane Group told Reuters.

CEO Raffy Kassardjian said his business had grown from processing an average of 1.5 million surplus garments per month to over 4 million in January, the busiest month ever.

According to Euromonitor, the past year was very bad for the apparel industry, with sales falling by around 17% compared to 2019. And the future is uncertain.

Estimates for 2021 range from pessimistic projections of a 15% drop in sales at McKinsey to an 11% recovery at Euromonitor.

So are there any bright spots? Well, a lockdown pajama boom offers a bit of relief.

“If you want to know what the UK public at large is wearing pajamas again,” said Steve Rowe, CEO of Marks & Spencer, last month, while Hugo Boss hinted at the same phenomenon and said it was “our offer classic business clothing “and expanded the range of casual clothing”.

But that is cold comfort for some factory owners.

“The demand for pajamas is high for life,” Ali admitted in Dhaka. “But not everyone can make pajamas!”

($ 1 = 0.7325 pounds; $ 1 = 0.8315 euros)

(This story corrects dropped letters in Raffy Kassardjian’s name.)

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