Inventory piles up with Chinese clothing retailers

20 Feb '12

2 min read

Large unmanageable inventories have become the order of the day for large and medium-scale enterprises in the Chinese clothing manufacturing and retail sector.

Buoyed by the increase in demand for clothing in domestic and global markets, clothing companies set up large units to achieve economies of scale.

However, the current slowdown or stagnation of demand in both these markets is proving to be a thorn for these Chinese garment producers.

Experts from the industry are of the opinion that the inventory lying with apparel factories is enough to meet the demands of the Chinese market for two years, even if all the factories close down.

The financial results of Metersbonwe ending September 2011 reveal that the company's inventory value stood at 2.982 billion Yuan, or 83 percent of its net assets.

Xtep's inventory value grew by 92 percent to reach 887 million Yuan last year.

Adidas's sales in some areas in China have seen negative growth; Production is rising, while sales are on the decline, causing a lot of inventory backlog.

High inventory means a lot of money gets struck, which ultimately leads to cash flow problems for the concerned company.

Many of these companies have reached the critical point and a further increase in inventories could lead to disastrous consequences, aver experts.

Insiders from the industry attribute this situation to an oversupply situation as garment producers and retailers set up new plants or expanded.

However the demand is not enough to meet the expanded production volumes.

Fibre2fashion News Desk - China

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