Spurred by “Double 11” and price increases, China’s retail industry performance hit a five-month high in November. Among consumer categories, clothing sales remain weak, indicating oversupply in this category and serious market polarization. This is mainly reflected in the gap between high-end brands and mid- to low-end brands. High-end brands have not followed the trend, but consumption has returned significantly. At the same time, inventory data increased from 821.02 yuan in the first three quarters of 2018 to 85.418 billion yuan in the first three quarters of 2019. Clothing is essentially a product that is constantly updated. In the process of upgrading, clothing inevitably generates inventory. Instead, these inventories will backfire on apparel retail companies.
Polarization of clothing and textile retail
Spurred by “Double 11” and price increases, China’s retail industry performance hit 5 in November A new monthly high, with a year-on-year nominal increase of 8.0% to 3,809.4 billion yuan, exceeding market expectations of a 7.6% increase, and far exceeding the 7.2% increase in October. However, after excluding price factors, the retail industry actually grew by 4.9% in November, which was the same as in October. Previously CPI data released by the Bureau of Statistics showed that consumer prices rose by 4.5% year-on-year in November, hitting a new high in the past seven years since January 2012. Among consumer categories, clothing sales remain weak, indicating oversupply in this category and serious market polarization. In November, sales of clothing, shoes, hats, and knitted textiles by units above designated size were 142.7 billion yuan, a year-on-year increase of 4.6%. However, considering that the “Double 11” effect suppressed a 0.8% sales decline in October, the overall two-month performance was still worse than the previous eleven. With an overall monthly increase of 3.0%, from January to November, sales of clothing, shoes, hats, and knitted textiles by units above designated size were 1.2016 billion yuan. “Polarization” is mainly reflected in the gap between high-end brands and mid- to low-end brands. High-end brands have not followed the trend, but consumption has returned significantly. Luxury brands are accelerating their entry into domestic e-commerce platforms. CITIC Construction Investment (27.970,0.27,0.97%) research believes that although the overall domestic retail sales from January to April this year did not rebound significantly compared with the slowdown since the second half of last year, the trend of stabilization Obviously, most luxury brands continued to achieve good growth in the first quarter, and accelerating their entry into e-commerce is one of the manifestations of their optimism about the robustness of domestic high-end consumption.
Inventory levels are still at a high level
With the end of the third quarter report of 2019, the operating income and profit side of the textile and apparel listed sector are under slight pressure on the year-on-year growth rate due to the high base of last year’s cold winter. , First Textile Network monitoring data shows that as of the first three quarters of 2019, 83 A-share textile and apparel companies have achieved operating income of 191.6 billion yuan, a decrease of nearly 500 million yuan from 192.158 billion yuan in the same period last year, and the net profit attributable to the parent company A total of 11.868 billion yuan, a decrease of about 2.8 billion yuan compared with 14.681 billion yuan in the same period last year. Inventory data increased from 821.02 yuan in the first three quarters of 2018 to 85.418 billion yuan in the first three quarters of 2019. Pacific (3.730, 0.02, 0.54%) Securities analyst Guo Bin said that in the third quarter of 2019, due to the losses of some companies in the casual wear sector and the lower-than-expected performance of some leading companies, revenue and net profit were greatly dragged down. Due to the cold winter effect in the fourth quarter of 2017, the overall base level in 18H1 is relatively high. Looking at the fundamental data of the apparel industry in the second half of the year at this time, it is expected to be relatively optimistic. From the perspective of seasonal factors, the base of the warm winter in the fourth quarter of 2018 is low. As the base effect decreases in the future, the industry’s year-on-year data will show marginal improvement. In the future, as the high base effect weakens and the consumption environment stabilizes, some sub-industries and companies will improve, and a rebound is expected in the second half of the year. Clothing is essentially a product that is constantly updated. In the process of upgrading, clothing inevitably generates inventory. Instead, these inventories will bite back on apparel retail companies and bring heavy cost burdens to them. However, data from the National Bureau of Statistics show that the year-on-year growth rate of clothing industry inventory has maintained a downward trend since 2013, and reached its lowest value in many years -0.30% in the first three quarters of 2019. The ratio of inventories to current assets also dropped from 28.12% in 2013 to 26.9% in August 2019, a decrease of 1.2 percentage points. On the other hand, the downturn in the industry and increasingly strict environmental protection requirements for production have forced small businesses and workshops in the industry that are poorly managed and whose production does not meet standards to exit the market, accelerating the process of survival of the fittest in the industry.
The downstream market has improved slightly but still lags behind the peak season
Recently, the China Cotton Bank coordination research team visited the textile and apparel markets and industrial clusters in Guangdong, Zhejiang, Henan, Shandong and other areas enterprise. According to a survey of major textile and apparel markets in Guangzhou, the downstream market has improved compared with last month, but there is still a significant gap compared with the peak season. The clothing wholesale markets in Guangzhou and Zhongshan used to have booming sales, but now they are deserted. The reasons for this phenomenon are not only the decline in demand caused by the economic downturn, but also the changes in business models and government regulation and governance. During the peak season, the warehouses of printing and dyeing factories are full of gray fabrics and the order queues are long. However, most of the companies surveyed currently report that the operating rate of printing and dyeing factories in Guangdong is less than 60%. This is despite the fact that many companies have been shut down due to environmental protection. For intermediate products such as colored yarn, colored cloth, and shirt cloth, during the peak season, there will be a series of hot sales based on clothing styles and fabric demand. This year, traders and processing plants say that there are only one or two hot items coming out in stages, and some traders even say that they have not seen any hot items yet. In addition, the companies surveyed believe that the inventory of finished products in their respective industrial chains is very large, and it is difficult toWhether it is the imported yarn at the port or the inventory of colored yarn, gray fabrics and clothing, they are all at a historically high level. Downstream expectations for the overall market are pessimistic, and the surveyed companies said that the current industry situation is the worst year they have ever seen. At the same time, most people believe that the trend will not improve. The reason is that the global economy is down and demand continues to decrease. In particular, the U.S. manufacturing PMI hit a new low, the inversion of long- and short-term bond yields, and the sharp appreciation of gold all showed investors’ strong risk aversion. Coupled with the Federal Reserve’s voice of cutting interest rates, it shows its pessimistic expectations for the U.S. economy. </p
