Domestic Garment Industry Needs To Slow Down Its Pace Of Expansion

Esprit recently released its 2011 financial year performance report (up to June 30th), with a net profit of HK $79 million, a sharp decrease of about 98% compared with HK $4 billion 226 million in the same period last year.

At the same time, operate "UNIQLO". brand The latest data released by Japan's fast retailing company, Spanish Inditex company running ZARA brand and H&M company show that sales revenue and net profit of these companies have also declined to varying degrees or narrowed.

As Esprit79% sales come from the European market, the European debt crisis has led to a weak local market consumption. Compared with the depressed European market, the domestic apparel market has seen a substantial increase in its revenue and net profit.

　 Profit rise is not demand pull

Publicly available data show that sales of clothing sector listed companies reached 40 billion 627 million yuan in the first half of the year, up 22.43% over the same period last year, and net profit attributable to parent companies was 3 billion 629 million yuan, up 49.12% over the same period last year. Dongxing securities textile and garment industry analyst Tan Ke believes that because the clothing sector is dominated by brand clothing, these enterprises have certain market bargaining power and excellent management ability, which can promote profit growth faster than revenue by raising gross margin or controlling costs.

In the domestic clothing brands that had a certain coincidence with the target consumers of the above multinational clothing companies, the United States apparel achieved total revenue of 3 billion 792 million yuan in the first half of 2011, an increase of 49.31% over the same period last year, and realized a net profit of about 376 million yuan, an increase of 833.06% over the same period last year. Semir apparel achieved a total revenue of 3 billion 9 million yuan in the first half of this year, an increase of 36.64% compared with the same period last year. Net profit attributable to listed companies was 437 million yuan, an increase of 29.12% over the same period last year.

The main reason for the increase in net profit is that Cotton price Soaring prices, rents of commercial real estate and rising labor costs have also led to rising clothing prices. Guo Jin securities analyst Zhang Bin told reporters, "before 300-500 yuan can buy a good clothes, now clothes will be thousands of dollars."

"The rise of prices has directly contributed to the rapid growth of net profit of listed companies, but this is not the pull of demand, not the increase of sales volume. This can be seen from the simultaneous increase in inventory." Zhang Bin told reporters.

According to WIND statistics, in the 2011 China Daily, the inventory turnover days of Smith Barney clothing were 243.31 days, compared with 110.69 days in the same period last year, and the turnover days of Semir clothing inventory were 103.22 days, compared with 72.87 days in the same period last year. In the first half of the first half of this year, Li Ning Co's revenue and China's trend in Hong Kong stock market were reduced by 4.8% compared with the same period last year due to inventory and other factors. China's trend revenue plunged 45.1%.

　 Stock growth exceeds revenue growth

It is not just Lining and China that are facing inventory problems. In the first half of this year, the stock value of XTEP was 887 million yuan, compared with 46 thousand and 300 yuan in the same period last year, an increase of about 92%, of which the finished product amounted to 474 million yuan, compared with 84 million yuan in the first half of last year, the former was 5.64 times the latter.

"From the annual report this year, the brand clothing industry inventory growth rate has exceeded the growth rate of sales revenue." Zhang Bin told reporters that "after the rapid growth of the garment industry since 2009, it began to decline as a watershed in May this year. At this point, after the crazy expansion of the domestic brand clothing industry, the phenomenon of overcapacity has gradually emerged. {page_break}

Take the sports clothing brand as an example, market analyst Ma Gang statistics, from 2006 to 2009, the number of Lining's stores increased from 4297 to 7249, a net increase of 2952, and the number of stores in Anta also increased by 2483. {page_break}

"Chinese enterprises feel that they have lost market share just as enterprises are dying, so they have been struggling to keep their horses in the market, but less shops do not mean sales revenue will be reduced." Zhang Bin said, "with the intensification of competition and the rising cost of labor, the old model of crazy expansion and high growth has been hard to replicate."

"Early expansion, product homogenization is serious, especially sports brand, such as Lining, China trend, etc. it is hard to see the difference after logo is removed." Zhang Bin said, "the period of high growth of Chinese clothing is coming to an end, and even the first tier cities are showing signs of saturation. The integration of the whole industry has become a pressing matter of the moment. Domestic brand clothing enterprises must reduce their production capacity, change their thinking and develop their individuality so as to increase sales and maintain high growth and high profits.