IMPRESSIONS from a Cross-section

Topic

Any specific areas where you are facing issues due to the spread of COVID-19, and have you quantified your projected losses?

Industry could be looking at 10%-15% job losses
COVID-19 continues to rage, prompting the Indian administration to lock down several districts. Fibre2Fashion spoke to a cross-section of industry players.


There are only two ways to ward off the virus—minimise social contact, and improve personal hygiene. All CMAI members have been requested to follow simple rules for both of these, and hopefully, this will have a salutary effect.
 
As of now, the closure of shopping spaces such as malls and high street stores, along with the general advisory to avoid public spaces has crippled demand, which is the biggest problem. However, as this crisis continues, many other issues will become equally grim – mainly the working capital shortage. Members will not have the money flow required for payment of taxes, discharge of bank interest, repayment of loans, statutory dues, etc. Unless the government steps in with some major decisions, industry is going to go in a total tailspin. An economic disaster as bad or worse than the health crisis is just round the corner.
 
At this juncture, it is difficult to quantify the losses, but it would be safe to assume that most companies would be facing a drop of 30 per cent or so in their sales as well as profitability, and the industry could be looking at a 10 per cent to 15 per cent job losses.

Order postponement and order cancellations happening from buyers from Europe and the US. Due to uncertainty and store closures, buyers are also confused with the way forward. Our members are actively engaging with buyers to try for execution of current orders. Apart from this, there is a working capital shortage due to liquidity issues in the market due to current crisis. 
 
One-time restructuring of loan accounts for the needy units to convert their working capital loans to long-term loans and infusion of new working capital will help the textile units to manage the crisis. One-year moratorium on interest and term loan repayments is the need of the hour, as it will help manufacturing units to tide over this difficult period.

As a business, the sales numbers have dipped significantly as most offices have shut down. So, we are waiting it off and hoping that everything will get back to normal soon. All ongoing sales deals have come to a halt, which has disrupted the revenue. Partnerships have also ceased at the moment as no one is responding, especially on the international front.
 
It is projected that due to COVID-19, the stock market will hit its lowest since WW2. Though the B2B orders have come to a halt, our B2C orders have been increasing rapidly. So, there is still hope left. Maybe the losses will increase, but it is too early to comment on the same. The faster we find a way to deal with the situation, the better it is for businesses.

Lack of correct and all-encompassing information is primarily the issue that ends up creating panic. Our management is trying its best to filter and communicate scientific as well as authentic information to team members to ensure their health and safety.

The situation is evolving daily as far as India is concerned. If market scenario is anything to go by, all players big and small will need to revise their revenue targets and forecast.

At this time, we cannot estimate the losses. It will hit our payment cycle as sales at the retail outlets have already been hit. This will push us back by at least 3 months and will also affect the Festive/Winter sale going forward.

Our sales team is the most affected by this. Our online business continues as before. Overall, we are definitely seeing a reduction in our sales. We have started to cut back a little in purchases and expenditure but are watching closely. I am very happy with the way the government is handling the situation and I am really hoping that things will be back to normal in the next couple of weeks.

Retail sector is at very high exposure risk. All our mall stores are closed, and our retail stores are sanitized. It's too early to predict how long this situation will last, we remain confident in our strategy. We retailers have to see how to survive since there is still no clarity how long this scenario will exist. We are in constant touch with our suppliers, stakeholders and are making contingency plans to ensure minimal impact to our supply chain.

We are relatively less affected as most of the materials or components we use in our setup are locally sourced/made inhouse. We have issues with shipping. Chinse new year followed by corona outbreak has created severe challenges to daily shipping, and delivery times have spiked up. 

We have not yet quantified our projected losses, because we do not have an end date to this problem. But considering our orders have dropped by only 5 per cent, we should not see more than ₹10,00,000 loss over 2 months.

Covid-19 has brought disruptions in the supply chain due to economic slowdown. Importers are asking for delay in shipment or even cancelling it. Indirectly, it would hit us also. People would not buy, and it will be a chain reaction that would come back to us. As everywhere in the world, retail sales are also not happening.

Talking about projected losses, the hosiery segment is a ‘basic necessity’ focused industry. Our products have periodical peak seasons and therefore, despite the slowdown, we have not incurred any losses. Once the situation is under control and summer peaks, we are expecting the sales to resolve as usual.

We had a few upcoming trunk shows pan-India which had to be postponed due to the virus. Our client engagement events are also postponed until further notice. Additionally, we decided to extend the delivery period for the orders that were already received prior, to make sure our workforce is protected at this time. Client trials are also getting postponed as our clients are unable to travel or visit the store due to the self-imposed quarantine that is currently predominant. But since everyone is going through this situation together, everyone has been more than understanding.
 
We keep the financial planning for the brand airtight throughout the year so in situations like this, we are a bit more guarded. Since our international clients are still engaged with us virtually, we are expecting to break-even at least for the coming month. For us, the biggest issue in situations like these is liquidity and we have cut all unnecessary costs to try and limit our exposure until May.

Published on: 23/03/2020

DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.

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