Moody's thumbs up to US apparel and footwear industry

02 May '15

2 min read

Ratings agency Moody’s has given a thumbs up to American apparel and footwear industry. In a new report, Moody's Investors Service has said the outlook for the US apparel and footwear industry remains positive,

Over the next 12 to 18 months, apparel makers will continue to benefit from lower input costs and the expansion of their direct-to-consumer businesses. And for the most part the stronger US dollar won't affect constant-currency income growth this year, though if foreign-exchange rates remain near current levels, it will significantly pressure earnings in 2016.

"We are maintaining our positive outlook for the US apparel and footwear industry, as we believe companies have hedged a meaningful portion of their 2015 inventory purchases against foreign-currency translation risk, alleviating margin pressure in the near term," said Moody’s Vice President -- Senior Credit Officer, Scott Tuhy. "Pressures are likely to emerge next year, however, as the currency hedges companies took out at more favorable foreign-exchange rates expire."

Moody's is maintaining its forecast for industry operating income growth of 7 per cent to 9per cent in 2015 on a constant-currency basis, but now expects that it will to drop to 4 per cent to 6 per cent in 2016, Tuhy said. If the dollar maintains its current strength, Moody's could lower its outlook for the US apparel and footwear industry to stable in the second half of this year, but if it continues to strengthen rapidly, the outlook could be revised downward sooner. Conversely, if the dollar weakens, the outlook likely would remain positive for some time yet.

Mergers and acquisition are likely to remain part of the US apparel and footwear industry landscape over the next 12 to 18 months as large, global clothing manufacturers continue their push into lifestyle brands, the report said. (SH)

Fibre2fashion News Desk - India

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