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$66.63 -3.8  -5.4%

Last Trade - 20/01/22

Sector
Consumer Cyclicals
Size
Large Cap
Market Cap £19.25bn
Enterprise Value £22.44bn
Revenue £8.05bn
Position in Universe 484th / 7397

Retailers lose love for Asia: Snarled supply chains force manufacturing exodus to Balkans, LatAm

Tue 9th November, 2021 11:00am
By Siddharth Cavale and Corina Pons
    Nov 9 (Reuters) - Major clothing and shoe companies are
moving production to countries closer to their U.S. and European
stores, smarting from a resurgence in cases of the Delta variant
of the coronavirus in Vietnam and China that slowed or shut down
production for several weeks earlier this year. 
    The disclosures come amid a massive shipping logjam that is
driving up costs and forcing companies to rethink their
globe-spanning supply chains and low-cost manufacturing hubs in
Asia.  urn:newsml:reuters.com:*:nL8N2QQ3N0. 
    The latest example is Spanish fashion retailer Mango, which
told Reuters on Friday it has "accelerated" its process of
increasing local production in countries such as Turkey, Morocco
and Portugal. In 2019, the company largely sourced its products
from China and Vietnam. Mango told Reuters that it would
"considerably" expand the number of units manufactured locally
in Europe in 2022. 
    Similarly, U.S. shoe retailer Steve Madden  SHOO.O  on
Wednesday said it had pulled back production in Vietnam and had
shifted 50% of its footwear production to Brazil and Mexico from
China, while Rubber clogs maker Crocs  CROX.O  said last month
it was moving production to countries including Indonesia and
Bosnia. 
    Bulgaria, Ukraine, Romania, the Czech Republic, Morocco and
Turkey were some of the countries drawing new interest from
clothing and shoe producers, though China continues to produce a
large share of the apparel for U.S. and European clothing
chains.   
    "We are seeing a lot of growth in freight and trucking
activity in the former Soviet Republics ... a big rise in
Hungary and Romania," said Barry Conlon, chief executive of
Overhaul, a supply chain risk management firm.    
    In Turkey, apparel exports are expected to reach $20 billion
this year, an all-time high, driven by a spike in orders from
the European Union, Turkey’s Union of Chambers Clothing and
Garment Council data showed. In 2020, exports totaled $17
billion. 
    In Bosnia & Herzegovina, exports of textiles, leather and
footwear amounted to 739.56 million marka ($436.65 million) in
the first half of 2021, which was higher than for all of 2020. 
     "Many companies from the European Union, which is our most
important trading partner, are looking for new suppliers and new
supply chains in the Balkan market," said Professor Muris
Pozderac, secretary of the association of textile, clothing,
leather and footwear in Bosnia & Herzegovina.
     In Guatemala, where Nordstrom  JWN.N  significantly shifted
 its private-label volume production in 2020, clothing exports
were a touch over $1 billion as of the end of August this year,
up 34.2% from 2020 and even 8.8% higher than in 2019.       
     To be sure, many companies are also still heavily reliant
on Vietnam, where recent production stoppages have caused
significant disruptions. Vietnam’s government said in October
that it will fall short of its garment exports target this year,
by $5 billion in a worst-case scenario, due to the impacts of
coronavirus restrictions and a shortage of workers.  urn:newsml:reuters.com:*:nL4N2R11SY
 
    Factory inspections in Vietnam - a proxy for retailer
manufacturing orders - fell 40% in the third quarter versus the
second quarter, with production during those months quickly
moving to Bangladesh, India and Cambodia. Inspection rates in
Vietnam were still hovering at lower levels in the fourth
quarter, with a small uptick seen in late October, said Mathieu
Labasse, vice president of QIMA, a supply-chain quality control
and auditing firm that represents more than 15,000 brands.    
   Apparel maker VF Corp  VFC.N  and outdoor gear maker Columbia
Sportswear  COLM.O  were among companies that warned that there
would be delays in fall and spring collections and in some cases
insufficient size assortments.     
    Michael Kors handbags maker Capri Holdings  CPRI.N  said on
Wednesday that it would not have the inventories it wanted for
the holiday season, while athletic gear maker Under Armour
 UAA.N  said on last Tuesday it was canceling purchase orders
from Vietnam just to help get "the factories get back up and
caught up."     

    ($1 = 1.6937 marka)

 (Additional reporting by Ceyda Caglayan in Istanbul and Diego
Ore in Mexico City; Editing by Steve Orlofsky)
 ((siddharth.cavale@thomsonreuters.com; Cell: +91 74064 47228;
Reuters Messaging:
siddharth.cavale.thomsonreuters.com@reuters.net))
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