Economic slowdown hits GUNZE's apparel biz

GUNZE Group, which has enjoyed four-fold growth in its net income, thanks to the market recovery, reported disappointing performance in the apparel segment with operating income dipping sharply by 45.9 per cent for the six month ended September 30, 2013.

The apparel business posted net sales of ¥34,080 million, a marginal increase of 0.3 per cent year-over-year, while operating income was at ¥453 million, down 45.9 per cent as compared to the same period a year ago.

The apparel segment remained sluggish due to the slowdown in the overseas economy and increasingly intense price competition for GUNZE’s mainstay products. The apparel business continued to experience challenges, including cost hikes reflecting the depreciation of the yen and escalating labor costs outside Japan.

Increasing raw material costs as well as looming economic uncertainty outside Japan further worsened situation. Moreover, due to a delay in improvement of employment and income, personal expenditures still showed no signs of a pickup.

Among the apparel segment, sales of innerwear remained disappointing. Although GUNZE worked hard to reduce cost of sales through improvement of productivity while also concentrating on fixed cost cutting, the weaker yen and increasing labor costs outside Japan negatively impacted the innerwear business.

In leg wear, plain pantyhose products continued to perform impressively and leggings pants, which have set a new trend in fashion, also enjoyed robust sales. Still, this was not enough to offset the increase in cost of sales due to the yen’s depreciation.

Overall, GUNZE Group reported a consolidated net sales for the first two quarters of the current fiscal year amounted to ¥69,523 million, a growth of 9.8 per cent on a year-over-year basis.

Meanwhile, consolidated operating income stood at ¥1,478 million (a year-over-year increase of 68.9%), while consolidated ordinary income was ¥1,969 million (a year-over-year increase of 162.2%). Consolidated net income was ¥802 million (a year-over-year increase of 311.3%).

Buoyed by earnings, the board of the company has declared a dividend of ¥7.5 per share for the current financial year ending September 30, 2013 to be paid later this year.

Fibre2fashion News Desk - India