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COVID-19 adversely hits textile, apparel, fashion sectors

Mar '20
Pic: Shutterstock
Pic: Shutterstock
The COVID-19 pandemic has adversely hit the textile, apparel and fashion sectors worldwide with tremendous loss to businesses—which cannot be quantified now as the virus continues to spread—and potentially deleterious impact on workers. As global organisations urge brands to protect workers, enterprises are busy tweaking business models to cope with the crisis. Dipesh Satapathy summarises.

Governments have taken and are continuing to implement emergency measures, including shutting down public places, restrictions on travel and assembly in public, and setting up screening and quarantine facilities.

Companies, meanwhile, are busy implementing partial or full store closures, ‘work from home’ options for employees, tackling cancelled or deferred export orders, exploring sources of raw material other than China and encouraging customers to shop online.

Retailers with a more diverse supply base are more immune to the effects of the pandemic as they can shift volumes from one supplier to another, offering some protection against the disruption in China.

Moody's Investors Service revised its forecasts for most Asia Pacific (APAC) nations based on the possible impact of the pandemic. Risks for APAC firmly tilted to the downside, including from much weaker European and American economies, than currently assumed. The forecasts highlighted no growth in Japan and Singapore, and slower growth in China.

Countries like the United States, Germany, Italy, France, the United Kingdom and Japan, have taken a slew of measures to overcome the disruption in economic activity caused by the pandemic. These include reduction of bank interest rates and cash reserve, debt moratorium for micro, small and medium enterprises (MSMEs), deferment of loan and tax payment without interest, announcement of new bridge loans and credit guarantees.

Amsterdam-based Clean Clothes Campaign, the International Labour Rights Forum and the Worker Rights Consortium, both based in Washington, DC, and the Maquila Solidarity Network headquartered in Toronto have urged all clothing brands to take immediate proactive steps to protect workers who make their goods in the face of the pandemic.

Factory closures in many countries, such as Sri Lanka, Bangladesh, Indonesia, Albania and those in Central America—whether temporary or permanent—are hitting low-paid garment workers hard, especially migrant workers who may not have local social networks to rely on and could face additional restrictions or xenophobia. The situation has been especially dire for weeks in Cambodia and Myanmar, a joint statement by these organisations said.

Closure of shopping spaces and the general advisory by governments to avoid public spaces has paralysed demand, affecting sale of garments. Several US retailers have temporarily closed their outlets for minimum two weeks beginning March 17 and will pay their employees for the period of the shutdown. These include PVH Corp, Vince Holding Corp, Chico’s FAS, Tilly’s, Guess, J.C. Penny Company and Walmart.

While stock prices of top garment and footwear brands and retailers—including Nike, Under Amour, Levi Strauss, Skechers USA and Crocs in the United States; Fast Retailing in Japan, Germany’s Adidas; Italy’s Aeffe SpA; Sweden’s H&M; Anta Sports Products Ltd in Hong Kong; and France’s Kering—took a hit recently, prominent rating agencies lowered gross domestic product (GDP) growth forecast for several countries, including India.

In fact, share prices of textile-apparel companies in the United States, India, Europe and Hong Kong witnessed a double digit percentage fall during the fortnight from March 2 to March 17. Stock prices of Indian textile and apparel retail companies too plummeted. These include Welspun India, Indo Count Industries, Page Industries and V-Mart Retail.

The Clothing Manufacturers Association of India (CMAI), which foresees an economic disaster, said most apparel companies in the country would face a drop of 30 per cent in their sales and profitability, and the industry would see an unemployment level of 10-15 per cent. If the pandemic continues, working capital shortage will not permit companies to pay taxes, repay bank loans and other statutory dues, it said.

Trade bodies across India, including the Tiruppur Exporters’ Association (TEA), The Cotton Textiles Export Promotion Council of India (TEXPROCIL) and the Confederation of Indian Textile Industry (CITI), have requested the government for urgent policy intervention for the textile and apparel sector by offering a relief package, moratorium on loan repayments for the next fiscal and exempting all raw materials and intermediaries from anti-dumping duty and basic customs duty.

CITI has also suggested that cotton yarn and fabrics be immediately included under the Rebate of State and Central Taxes and Levies (RoSCTL), Interest Equalisation Scheme (IES) and the Merchandise Exports of India Scheme (MEIS) to prevent job losses for millions in the handloom, power loom and spinning sectors.

Meanwhile, India has prohibited export of all ventilators, disposable surgical masks and specific textile raw material for masks and coveralls to avoid any possible shortage of personal protective gear for healthcare professionals. Many Indian apparel brands and e-commerce firms are implementing measures like ‘work from home’ and assessing earlier revenue targets.

The State Bank of India (SBI) has announced an emergency credit facility for borrowers hit by the COVID-19 pandemic. A maximum loan amount of ₹200 crore or 10 per cent of the existing fund-based working capital limits can be availed under this. The facility can be availed of till June end and will be specifically aimed at MSME borrowers.

Coimbatore-based Indian Texpreneurs Federation (ITF) is getting more market information from its members and sharing with entrepreneurs to allow them to take a call on production as buyers from Europe and the United States are either postponing or cancelling orders.

Pakistan’s textile sector, already saddled by an extreme cash flow crunch, is highly unsettled by the pandemic as buyers abroad are cancelling and deferring orders. According to the Pakistan Textile Exporters Association (PTEA), the situation is leading to massive de-industrialisation, a significant fall in exports and an unmanageable level of unemployment.

The pandemic has also affected Central America’s garment exports and deliveries. Nicaragua foresees and full-year export decline, while Guatemala is reportedly witnessing delays in apparel shipments and feedstock shortages.

Turkish media reports say many global brands, including Superdry, Inditex, H&M, Hermes-Otto, Debenhams and Ralph Lauren, have already diverted their orders to Turkey for which the country has to increase production, especially for summer collections.

Several global fashion events, including the 2020 Council of Fashion Designers of America (CFDA) Awards, Giorgio Armani’s April cruise show, Prada’s May resort show, and the fashion weeks in Shanghai, Melbourne, Beijing, Seoul and Tokyo, have been postponed.

As the United Nations Conference on Trade and Development anticipates that the slowdown in global economy caused by the pandemic would cost at least $1 trillion and global foreign direct investment may shrink by 5-15 per cent, it is a ‘wait and watch’ situation for most countries.

Fibre2Fashion News Desk (DS)

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