Textile and clothing companies fear lower profits as orders slow

Most garment and textile companies received production orders until the third quarter or October, according to the Ministry of Industry and Trade.

However, the industry’s growth momentum showed signs of slowing from the middle of the second quarter when major export markets such as the US and EU fell into an inflationary spiral.

As a result, new orders decreased and customers shortened the order lead time from 6 months to 3 months.

A company specializing in the production of children’s fashion clothes in Dong Nai received new orders of 80,000 to 100,000 clothes from American partners every month.

Company director Thai Minh said that over the past two months, the number of new orders has dropped by 20 to 30 percent.

Minh said the situation will not improve in the short term if the inflation problem in the United States remains serious, forcing people to cut spending on non-essential goods.

“We promote our products in Canada and Mexico which have many similar consumer characteristics. We hope to get a few new contracts for the end of the year season,” she said.

The drop in textile and apparel orders was mainly due to slower consumption in major markets, particularly in the US and the EU, higher inventories by importers and strong inflationary pressures in the second half of the year. 2022 and early 2023.

“Early this year, after the pandemic situation was brought under control, countries reopened and our partners urged us to deliver the goods quickly, but now they are very indifferent,” Minh said.

The Vietnam Textile and Garment Group (Vinatex) and Rong Viet Securities Company (VDSC) predicted that demand for textiles and garments in the second half of the year will decline due to “overbought” and inflation that incites to rise. tighten the belt for non-essential products like fashion.

In addition, the dual impact of post-pandemic supply chain disruptions and the Russian-Ukrainian conflict has pushed up the price of raw materials for the apparel industry, particularly fabric and cotton, by around $7. 10% compared to the same period in 2021. .

Post-pandemic labor shortages, increased transport costs and labor costs triggered by rising fuel prices have negatively impacted the entire supply chain. textile and apparel supply from manufacturers to retailers, industry insiders said.

“Rising fuel, freight and logistics prices will significantly affect business performance in the last six months of 2022 and possibly into 2023,” said Duc Viet, CEO of the leading garment company. , May 10.

Textiles are also indirectly affected when the euro depreciates against the dollar. The euro fell last week to its lowest level in 20 years, around the same level as the USD, as the greenback surged this year amid global economic uncertainty.

Vinatex chief executive Cao Huu Hieu said a weaker euro would reduce the profit margin for buyers in EU countries.

VDSC expects the profits of Vietnamese textile and apparel companies to be hit hard in the second half of the year due to lower new orders.

Some large garment companies have adjusted this year’s business performance targets.

Song Hong Garment Jsc estimates its pre-tax profit at VND500 billion ($20.83 million), down 8% from a year ago.

Nguyen Van Thoi, chairman of TNG Investment and Trading Joint Stock Company, said the impacts will be uneven between companies in the same industry.

He said the industry can recover if inflation is brought under control and consumer purchasing power increases.

According to data from the Ministry of Industry and Commerce, exports of textiles and garments reached $22.3 billion in the first six months of the year, an increase of more than 20 percent year-on-year. .

Michael O. Stutler