News

The global clothing industry has stepped into a cold winter, and the Chinese market may not be a lifesaver!

On May 27, I.T (00999. HK) issued its financial report for 2019. According to the financial report, during the reporting period, the company's revenue was HK $7.719 billion, down 12.6% year-on-year; gross profit was HK $4.734 billion, down 16.1% year-on-year; net loss was HK $746 million; the company's equity holders should account for HK $747 million.

1. T is mainly engaged in the sales business of fashion and accessories, which is in the downstream of the whole clothing industry chain. Ruyi group (002193. SZ), the upstream supplier of the clothing industry, and Adidas, the midstream brand（ PINK:ADDYY ）UNIQLO and other international famous brands are also struggling.

As a result, when the global clothing industry is in the cold winter, many clothing giants are aiming at the Chinese market. But recently, the financial statements of many clothing companies seem to throw cold water on the clothing industry, and the Chinese market is not as optimistic as you think.

Global clothing industry in winter

The first quarter financial report of Adidas, one of the sports brand giants in 2020, shows that the net sales of the company in the first quarter is 4.753 billion euros, down 19% year on year; the operating profit is 65 million euros; the net income is 26 million euros, down 96% year on year. At the same time, the company also predicted that the sales volume in the second quarter of 2020 may decline even more, which is expected to drop by more than 40% year-on-year, and the operating profit may be negative.

In mid April, Adidas issued a statement again, saying that in Europe, North America, Latin America, emerging markets, Russia and most of the Asia Pacific region, almost all self owned and dealer stores were temporarily closed, and wholesale and physical retail activities in the above markets were completely stagnant.

As a result of large-scale closure, Adidas inventory is high. According to the financial report, as of the end of December 2019, Adidas's inventory increased from 3.45 billion euros at the end of 2018 to 4.09 billion euros at the end of 2019.

Novel coronavirus pneumonia is also not the only way to get rid of the new crown pneumonia epidemic, not just Adidas.

Recently, UNIQLO parent fast retailing group (06288. HK) released its interim report for fy2020. The financial report shows that in the six months from September 1, 2019 to February 29, 2020, the comprehensive income of fast retailing group was 1.2 trillion yen, down 4.7% year on year; the net profit was 100.4 billion yen, down 11.9% year on year. In addition, fast retailing group expects that the company's net profit will decrease by 40% year-on-year in 2020, which is the first decline of UNIQLO's profit in four years.

In the last few months, UNIQLO stores in Chinese mainland and South Korea were temporarily closed due to the outbreak, which resulted in a huge impact on the company's revenue. Data shows that in March 2020, sales of UNIQLO's Chinese stores fell by about 40%, that of the US and Europe dropped by 50% year-on-year, and that of Japan by 28%.

But in the near future, UNIQLO's stores in China are gradually returning to operation since March, as the epidemic in China has improved significantly. It is reported that China is UNIQLO's second largest market after Japan, accounting for 22.4% of its total revenue. By the end of 2019, UNIQLO had about 750 stores in China.

China as a life-saving straw?

As a result, many foreign clothing giants are adding to the Chinese market at a time when the foreign epidemic is not over the critical period and the clothing industry is still paralyzed.

"The outbreak of novel coronavirus pneumonia has brought serious challenges, even healthy running enterprises can not be spared. At present, we are focused on meeting the current business challenges and double focusing on the opportunities we see in the recovery of the Chinese market and e-commerce business. " Kasper rorsted, Adidas chief executive, said.

Wu pinhui, UNIQLO's chief marketing officer in Greater China, told the media: "the annual opening plan of 80-100 UNIQLO stores will not change. In addition to a large number of stores in China, it is also the most important production base of UNIQLO's parent company, fast retailing group. Of the 242 garment processing plants it cooperates with, 128 are located in China. "

In addition to the fact that China's market has resumed normal consumption activities, Cheng Weixiong, an expert in textile and clothing brand management and founder of Shanghai Liangqi Brand Management Co., Ltd., also explained other reasons why foreign clothing brands are adding to China's market. He said: "the share of China's market in global consumption is rising rapidly; China's demand as an emerging consumer market is diverse and different The consumer market in Europe and the United States is relatively stable; the worship of famous brands in Europe and the United States by users in the local market also makes international brands more acceptable than local brands. "

At the same time, he also said: "China may not be able to save foreign clothing enterprises, but at least in the case of European and American markets blocked, increasing investment and maintenance in emerging consumer markets is the choice of any global brand."

In fact, the Chinese market does not seem as optimistic as you think.

China, the world's largest clothing market, is expected to shrink 15% this year, wiping out $60bn of market value, and spending little in April and may to retaliate, according to Oliver Wyman.

Moreover, most of the European and American customers served by many garment trading companies have suspended or cancelled orders. Therefore, in order to help themselves, many foreign trade enterprises have turned their exports into domestic sales, and also tried to broadcast "bring goods" live, turning online.