Zara, H&M And Other Clothing Brand Profits Have Reached A New High. Face Feeder Suppliers Are Under Pressure.

Zara parent group Inditex group released the first three quarters of 2019 earnings, as of the end of October, the first nine months of sales reached 19 billion 800 million euros, an increase of 7.5% over the previous year, net profit of 2 billion 700 million euros, an increase of 12% over the same period, gross margin of 58.2%.

The H&M group's operating profit in the first three quarters of 2019 was 11 billion 969 million kronor, an increase of 7% over the same period last year. The net profit for the current period was 9 billion 231 million kronor, an increase of 1.3% over the previous year.

In the first three quarters of 2019, the clothing brand's earnings report has been announced many times. From the above clothing brand sales data, their profits have a certain degree of growth. However, this year, the textile market is in a sluggish fashion. Clothing inventory is as high as 85 billion 400 million yuan. Then the problem comes. Downstream cloth owners see the clothing brand's financial annual report also raises the question: why is the profit of clothing brand growing, and the profits of our suppliers are decreasing?


In fact, under the downturn of 2019, the clothing brand also has polarization phenomenon. It is also a fast fashion brand, and Zara, H&M and other profit growth, while Forever 21 and New Look have suffered bankruptcy and bankruptcy. Some small brands in China are shrinking profits, Stockpiling and operating difficulties. Some smaller garment factories have gone bankrupt. Fabric suppliers also exist such polarization phenomenon, part of the fabric business volume steady rise, part of fabric business single volume encounter "Waterloo", but no matter how the sales volume, fabric merchants are facing the same problem, profit decline! This is the difference between garment enterprises and fabric suppliers.


One


Gray cloth prices fell, customers still keep down prices.


There are cloth boss ridicule: "clothing brand net profit is in our fabric suppliers in the hands of price pressure out." There is nothing wrong with it. Xiaobian thinks there is some truth in the boss's words. The price of grey cloth fell sharply in 2019, and almost all products fell by 10%-50%. Even the hottest T400 this year is also hard to escape the fate of falling prices. The boss of a weaving manufacturer specializing in producing T400 said that the sales volume of T400 was very good from the beginning of this year to the end of October, but the price was 40% lower than that of last year.


It can be said that the price of grey cloth this year is low in the past three or four years, and fabric suppliers have consciously lowered the price of fabric according to the price of grey cloth, while many customers are not satisfied enough, and they are still constantly lowering prices. In fact, people in the industry know that the price is already very low, but they are trying to keep the price down. For manufacturers of industry and commerce, they are depressed by double profits.


Two


The costs rose and the rent rose by 16%.


All along, clothing companies believe that the price of fabric will drop, the cost of fabric suppliers will be reduced, and quotations can also be reduced. But they do not know that the price of grey fabrics is falling while other costs are rising. The wages of workers can be said to be a small fee, rising every year, some technical jobs have exceeded 10 thousand yuan / month, and the monthly need to be issued on time, must not be defaulted. The rent is another important cost, which has been increased several times in 2019. It is understood that the current factory rent has risen from 280 yuan / square last year to 325 yuan / square, or 16%. If the selling price remains unchanged, the profit will lose 16%. Does this mean that the supplier's profits will not drop?


Three


Sales of fabric suppliers have shrunk.


In terms of sales volume, sales of these brands are growing, and have been on a steady upward trend. However, the volume of domestic fabric suppliers has been decreasing in recent years. Foreign clothing brands such as Zara and H&M are part of their suppliers from the domestic textile enterprises in Jiangsu and Zhejiang provinces, and their orders will be competing by these suppliers. Finally, there will be little left in every supplier's hands. According to the survey data of China silk net, the sales volume of fabric suppliers dropped by 30%-40% this year. Sales fell and prices fell, and profits fell.


The situation of clothing enterprises is completely different, although this year's clothing sales also encountered "Waterloo", but in terms of profit has not declined.


One


Apparel retailers are running small and the cost is falling.


Cost side, fabric as the main cost, this year the price drop is particularly much, the cost reduction also to clothing retailers reduce the burden. Moreover, the sewing price of clothing has also declined due to the reduction in the volume of garment factories. On the other hand, most clothing retailers do not have heavy assets, fabrics can be purchased from fabric suppliers, clothing tailoring and sewing can also be sent out, and no factory is needed, so long as the OEM can be sold, the operating cost pressure is smaller than that of fabric suppliers. The cost of clothing retailers is decreasing, while retail prices are increasing, and profits are also substantial.


Two


Clothing retailers cash back, capital chain smooth


Profits are directly linked to cash flows. The cash flow of clothing retailing is very good, all of which are cash withdrawal and there is no arrears. And their fabric purchases can be defaulted, and at least 3 months in arrears, or even more than half a year. The cost of garment sewing can also be defaulted, and it can also be in arrears for more than three months, like fabric payment. If the clothes are unsalable, stocks are large and funds are difficult, they can also use clothing inventory as payment to pay debts to fabric suppliers, not only clearing inventories, but also clearing money. Fabric suppliers and fabric inventory can only be "rotten" in the warehouse.


summary


Although garment manufacturers abroad have suffered many frustrations, for example, the recent closure of Zara in Wuhan, H&M has experienced four consecutive quarters of sales decline, the biggest performance in the trough, but they all through their own efforts, and ultimately improve the performance. Fabric suppliers should be the same. Sticking to the road of transformation, hard work and low performance are only temporary.