Garment retail sales growth rate is the lowest in ten years

Last year, China's apparel business realized total revenue of 1.565 billion yuan, a year-on-year decrease of 11.82%; net profit attributable to shareholders of listed companies was -447.448 million yuan, a year-on-year decrease of 1608.34%. China’s apparel has become the most widely listed apparel company that has disclosed its 2012 performance forecast.

However, the haze of the apparel industry does not only occur in China's apparel. Among the apparel listed companies that have disclosed their 2012 results, 40% of apparel companies have experienced a significant decline in their performance. According to the 2012 annual report disclosed by Smith Barney, operating income was approximately RMB 9.51 billion, a year-on-year decrease of 4.38%; net profit attributable to shareholders of listed companies decreased by 29.55% year-on-year. The same performance report for casual wear claims that last year it achieved revenue of 7.037 billion yuan, a decrease of 9.33% from the same period of last year; the net profit attributable to shareholders of listed companies fell by 38.24%.

Anta Sports is also not optimistic. For the first time in five years, its performance has declined. According to its 2012 financial report, Anta's turnover dropped by 14.4% to 7.623 billion yuan last year, and net profit slipped by 21.5% to 1.359 billion yuan, while gross profit margin dropped by 4.3 percentage points to 38%.

According to data from the China Business Information Center, the retail sales of apparel products of 100 major large-scale retail enterprises nationwide increased by 12.3% year-on-year in 2012, which is 8.1 percentage points lower than that of 2011. The retail sales volume of all types of clothing increased by 2.0% year-on-year, a 2.9% decrease from the same period of last year, which was the lowest growth rate in the past 10 years.

“2012 is the most difficult year for China's garment industry!” At the end of last year, there were industry insiders, and the high raw material prices and rising labor force gradually absorbed the profits of the apparel industry.

"Destock Wars"

However, the industry generally believes that, compared with the rise in various costs, the garment industry is facing a greater problem is the large number of inventories squeezed. 2012 is known as the “Inventory Year” in the apparel industry. According to the statistics of the same flush, at the end of 2011, 18 A-share garment companies accumulated inventory products of 8.682 billion yuan. By mid-2012, the inventory remained at the line of 8.494 billion yuan. In the first half of 2012, the total inventory of 42 domestic listed apparel and textile companies, including Anta, 361 Degrees, Xtep, etc., amounted to 48.3 billion yuan. Among them, Anta’s chief operating officer, Lai Shih-yin, disclosed that Anta’s book-sales ratio was about 5 times last year and it is expected that it will not worsen this year and continue to maintain its level at 5 times.

“Under the pressure of the capital market, some clothing brands blindly pursue speed, opening stores, and production speeds have increased substantially, but its single-storey efficiency decline has caused an increase in inventories.” Ma Gang, a clothing industry commentator, made comments here.

Under the pressure of high stock prices, all kinds of clothing companies began to "de-stock war", many stores were crowned "factory shop" "special store" "discount store" name, and even at a discount price. Taking Li Ning as an example, “cleaning up inventory” has become Li Ning’s number one task, so a number of discount stores and factory stores have increased rapidly. The 2012 semi-annual report showed that as of June last year, 952 brand stores were closed and self-operated stores were added. In the same period, Li Ning had a total of 271 factory stores and 394 discount stores, which was more than doubled from the end of 2010, and the factory store discounts had been as low as 30%.

At the end of last year, Li Ning invested 1.4 billion yuan to a 1.8 billion yuan "channel rejuvenation plan." In this plan, Li Ning does not hesitate to offset the accounts receivable by 40% of the price, and buy back channel inventory.

Zhang Tao, Anta’s vice president, told reporters that in terms of controlling inventory, Anta changed part of the ordering system to the distribution system, which means that the buyout method of distributor orders is converted into a flexible way of selling as much or less. At the same time, in order to reduce the potential inventory and discount rate on the retail channel, ANTA actively controls the quantity of orders. The most recent ordering meeting for the third quarter of 2013, Anta orders fell by 10% -20%. Anta is not a single case. Data show that in the first quarter, the orders of Anta, Xtep and other brands dropped by about 20%; Peak saw a 20%-30% decline in the ordering meeting in the second quarter.

New spring discounts?

For the apparel market in 2013, most industry analysts are not optimistic about the slowdown in export growth and weak terminal sales. Ma Gang generalizes that 2012 is the inventory year of the apparel industry, and 2013 is the year of adjustment for garment companies. “This year will allow many small businesses to be eliminated.”

Data shows that during the Spring Festival 2013, clothing retail sales only increased by 5.1%, which was a 17% decrease from the previous year, and 50 clothing retail sales data decreased by 15%. Lei Yu, a clothing analyst at Changjiang Securities, said that at the end of last year, the discounts at the mall were too large and some sales were overdrawn. In addition, the atmosphere for buying new clothes for the Spring Festival has been reduced. In addition to buying new products, other items can be bought at ordinary times.

In fact, after a year of "destructive warfare" in 2012, the destocking war will continue this year. At present, most brands in the mall have been listed on the spring market, and different from previous years, including Uniqlo, H&M, and other brands. Not only have the unit price gains in spring products not obvious, many apparel products have been put on the shelf to lower the price and begin to be discounted.

“This is a crucial transition period for the apparel industry.” Suntech Consulting pointed out that the current period of the Chinese apparel market is very similar to that experienced by European and American countries in the 1950s. In the future, the clothing market does not depend on cost reduction and production expansion to achieve profitability, but it also depends on the brand's popularity and design innovation.

Gao Dekang, chairman of the Bosideng Group, also stated yesterday that the key to the Chinese garment industry being out of its predicament lies with the brand, and the key is to go out. “Last year, some Chinese apparel companies encountered the 'stocking door', and some were indeed the problem of style. They did not develop the personalized products with the times.” He reminded garment companies whether they are managing or developing products. Have to keep up with the current trend of popular, otherwise the inventory will certainly be more.