COVID Infects Denim Sales and The Industry As Well

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It has been now over 150 days since WHO announced COVID 19 as a global pandemic, the world is still struggling to contain the virus and we hope in coming weeks, we find the much-awaited COVID vaccine.

In the month of April, when COVID 19 started to show its lethal and contagious face to the world, there were a lot of speculations made, from the paradigm shift in the consumer behavior to shrinking in the overall denim business for the next two to three seasons, there was a plethora of anticipation and hypothesis.

The godfather of denim – Adriano Goldschmied, in a live talk with the founder of Denimsandjeans Sandeep Agarwal, predicted that the global denim business will be shrunk by 50%. The prediction was brutal but his prediction seems to be very certain and close to reality.

BRANDS AND RETAILERS

The Jeans business has been already struggling for the last few years, the influence of athleisure on millennials adversely impacted the sales of Jeans globally and then this pandemic has taken a real toll. Retailers and Brands like G-Star Raw, JC Penny, True Religion, and Lucky Brand have filed chapter 11 bankruptcy during this pandemic period.

True Religion which 1st filed bankruptcy in the year 2017, has now seemed to be into a vicious debt trap. The brand reported

1. $110.5 million in first-lien term loan debt
2. Owed $28.8 million on an asset-based loan facility.
3. Posted a net loss of $50 million

The brand blamed the pandemic for making things very challenging to them, they have sent the workers on furlough to bolster their liquidity.

Lucky Brand filed for Chapter 11 bankruptcy the last month.
The brand has announced to sell all its substantial operating assets to SPARC GROUP and the intellectual property to ABG Group.

In its bankruptcy filing, Lucky Brand said it owes nearly $5 million to mall operator Simon Property Group, and millions more to suppliers in Anguilla, Sri Lanka, Guatemala, and India. The brand owed

1. $182 million to lenders
2.$79 million to merchandise vendors

The brand will remain operational however out of a total of 200 stores, 13 stores will be closed.

G Star Raw also filed for Chapter 11 bankruptcy and as per the reports, the landlord of its 475 Fifth Avenue NYC store found to be the biggest creditor with USD 426,000, this is the same store which was allegedly looted by the protesters during #blacklivesmatter protest.

Levis recently reported a decline of 62% in its 2nd quarter revenue which forced them to cut the workforce up to 15%. According to market research firm – NPD Group, there has been a double-digit fall reported in the sales of denim in the past three months compared to the last year.

The sales of premium/luxury jeans costing over $200 witnessed a slump of 40% during the same period, there have been apprehensions that Americans are now preferring lower-priced denim over premium one due to disposal income constraints.

So far as the UK is concerned, according to an estimation, COVID may reduce the spending by more than 20% than the usual spending made by the UK consumers which may bring a fall of GBP 11.1 bn / $13.06 bn in the sales of clothing and footwear in the UK.

SUPPLIERS

The pandemic did not affect only brands/retailers but also forced a lot of factories based in China, Bangladesh, Myanmar, India, Vietnam, and Cambodia to close its entire operation due to a substantial fall in orders as well as due to the failure in the payments commitments by brands.

Morgan Forde / Supply Chain Dive, data from USFIA.
 

According to local Bangladeshi media reports, over 7,854 orders were either canceled or postponed by the fashion industry during this pandemic. C&A alone canceled orders worth $166m, H&M canceled orders worth $178m, and Tally Weijl initially suspended orders worth $7m and canceled orders worth around $3m.

A total order of $3.2 bn was said to be canceled or postponed in Bangladesh only. Bangladesh annually exports clothing worth $35 bn, the cancelation within few weeks worth 10% of its total exports, though a lot of brands later assured for the payment of already made articles, however, the postponement dismantle the entire supply chain, especially the daily wage garment workers and left them in a lurch.

The industry is now recovering from the early devastation, though the recovery is pretty slow but gradually it will come back to normal. Textile and Apparel industry is one of the largest job creators in the world. This industry had a retail market value of $1.9 trillion in 2019 and according to the projection of BCG, with a CAGR of 3.5%, the valuation will reach at $3.3 trillion in 2030.

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