The EU’s “oil ban” on Russia has sent oil prices skyrocketing again! International oil prices have reached a new high in the past 14 years, and polyester filament has increased by nearly 2,000 yuan! Under high inflation, the textile industry is experiencing huge cost pressure, which may lead to more sales, less profit, or even more losses.
The market is too pessimistic about the chain reaction caused by the epidemic
Leading to a series of misjudgments
Since the second half of 2021, we have warned many times that the price war in the U.S. apparel industry is about to reignite.
As the financial reporting season comes to an end, the U.S. apparel industry is wailing. The main reason is that the market is too “pessimistic” about the chain reaction caused by the epidemic, leading to a series of misjudgments.
First, the entire apparel industry was frightened by the supply chain crisis. A large number of American apparel groups increased their purchases in the first quarter, even resorting to high-cost air freight to receive orders. Coupled with inflation, inventories continued to remain high in the first quarter.
This time, there are indeed huge delays in the supply chain, which leads to the first point. However, as lockdowns are gradually being lifted around the world at the beginning of the year, American consumers have embraced the real world far beyond the imagination of the retail industry. This has resulted in orders for arrivals in the first quarter still being Purchasing is based on retailers’ “epidemic thinking” – mainly sports, home furnishings, and underwear. In fact, consumers in the first quarter are more keen on occasion wear, which aggravates unsaleable inventory.
Finally, the impact of inflation has a great impact on low-income groups in particular, causing a significant decline in AUCs in the mass apparel market. This has also directly led to the substantial decline in profit performance of most apparel companies despite the increase in AURs driving sales growth.
Although the garment industry can quickly adjust orders, the current inventory and some orders in transit are still “epidemic thinking”. This lagging adjustment will take time to digest and will inevitably lead to the resumption of price wars, which may even be the most intense price war in history. First, after all, the shadow of huge inflation still lingers.
Reckoning after massive expansion
Price war has quietly started in the textile market
Misjudgment has also occurred “similarly” in the Chinese clothing market in 2021. At the beginning of 2021, China’s garment industry was stimulated by the consumption enthusiasm that recovered from the epidemic and expanded aggressively. However, the market has not yet slowed down due to overcapacity. But the price war has quietly started in the textile market!
According to market reports, Nisi Fang has taken the lead in joining the whirlpool of the price war. Recently, a customer reported that the minimum order for 1 million meters of Nisi Fang is 2.3 yuan/meter, and the minimum order for 5 million meters is 2.1 yuan/meter! The peak price of more than five yuan per meter is now sold at a discount of half, which is a heavy blow to the textile market.
Judging from the recent survey of the current inventory situation of enterprises by the Filament Weaving Association, 20% of the enterprises surveyed have inventory of less than 1 month, 62% of the enterprises said that the current inventory is 1 to 3 months, and 14% of companies are at a high level of inventory for more than 3 months, and 4% of the companies surveyed have inventories for more than 5 months. Their products include simulated silk fabrics and functional fabrics.
Now that the epidemic has recovered, the more we sell, it is not because of increased consumer demand for non-essential consumer goods, but because of inflation, which causes companies to raise prices and pass on part of the cost to downstream companies. However, this move weakens the In order to meet consumer demand, although sales increased, it was basically at the expense of sales volume.
Similarly, the Filament Weaving Association’s survey on enterprise satisfaction with current main product prices shows that the overall price is not high. 60% of the interviewed enterprises believe that the price is low and there is basically no room for profit; 18% of the enterprises believe that the current price is normal; 22% The company said that the current price of its main products is slightly profitable.
Coupled with labor shortages and inflation-driven labor costs, supply chain costs have increased significantly due to the surge in crude oil and commodity prices. The freight market is still hampered by congestion and shortages caused by the pandemic. Excessive cost growth is far greater than sales growth. Therefore, despite sales growth, growth, but profits fell sharply. The more they sell, the less they earn, or even the more they lose. Textile people are falling into this vicious cycle.
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