Armani Tests Sustainable Cotton Production in Italy

FILE PHOTO: The logo of Italian fashion company Giorgio Armani is seen at a shop in Zurich, Switzerland July 8, 2021.  REUTERS/Arnd Wiegmann/File Photo
FILE PHOTO: The logo of Italian fashion company Giorgio Armani is seen at a shop in Zurich, Switzerland July 8, 2021. REUTERS/Arnd Wiegmann/File Photo
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Armani Tests Sustainable Cotton Production in Italy

FILE PHOTO: The logo of Italian fashion company Giorgio Armani is seen at a shop in Zurich, Switzerland July 8, 2021.  REUTERS/Arnd Wiegmann/File Photo
FILE PHOTO: The logo of Italian fashion company Giorgio Armani is seen at a shop in Zurich, Switzerland July 8, 2021. REUTERS/Arnd Wiegmann/File Photo

Luxury fashion house Armani Group has started an experimental agroforestry plantation in southern Italy to test new ways to produce cotton sustainably, it said on Monday.

Armani said cotton planting started last month over one hectare of land - to be expanded to five hectares - in the southern region of Apulia.

Agroforestry is a land-use system that plants trees in and around crop and pastureland.

"Over five years, this farm site will be among the first field experiments in Europe testing agroforestry cotton with alternative tree species and regenerative practices," Reuters quoted Armani as saying in a statement.

The project is in collaboration with the Sustainable Markets Initiative’s Fashion Task Force and the Circular Bioeconomy Alliance, both founded by Britain's King Charles in his former role as the Prince of Wales, Armani Group said.

Sustainability has been a growing focus for the fashion sector this year, with both Armani and Gucci and Yves Saint Laurent owner Kering pledging cuts to greenhouse gas emissions, and EU governments agreeing a ban on the destruction of unsold textiles.



France's SMCP Strikes Deal with Reliance to Expand Into India

FILE PHOTO: People walk outside a Reliance complex which houses Jio World Plaza mall in Mumbai, India, March 10, 2022. REUTERS/Francis Mascarenhas/File Photo
FILE PHOTO: People walk outside a Reliance complex which houses Jio World Plaza mall in Mumbai, India, March 10, 2022. REUTERS/Francis Mascarenhas/File Photo
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France's SMCP Strikes Deal with Reliance to Expand Into India

FILE PHOTO: People walk outside a Reliance complex which houses Jio World Plaza mall in Mumbai, India, March 10, 2022. REUTERS/Francis Mascarenhas/File Photo
FILE PHOTO: People walk outside a Reliance complex which houses Jio World Plaza mall in Mumbai, India, March 10, 2022. REUTERS/Francis Mascarenhas/File Photo

Fashion group SMCP, owner of French fashion labels Sandro and Maje, said on Thursday it signed a deal with Reliance to expand into India and will join other high-end European brands opening stores in the Jio World Plaza mall in Mumbai.
"There aren't a lot of accessible luxury fashion labels in India so we think it's time to be pioneering," said SMCP CEO Isabelle Guichot, citing India's wealth and growing population of younger generations among reasons for entering the country.
After years of testing the Indian market with outlets in luxury hotels, high-end European labels are seeking to expand their retail presence there to tap its strong economic growth and a rapid rise in the number of local millionaires, Reuters reported.
SMCP did not disclose the financial terms of its partnership with Reliance Brands, which will become the exclusive distributor in India of Sandro and Maje. Reliance plans to open around 10 stores selling the SMCP brands in the next three to five years, said Guichot, starting with the mall in Mumbai developed by Indian tycoon Mukesh Ambani.
Reliance Brands, a subsidiary of Ambani's Reliance Retail Ventures, has partnership deals with dozens of high-end European and American labels, including Bottega Veneta, Burberry, Valentino and Tiffany.


Türkiye's Clothing Makers Face Rising Costs from Push to Help Textile Sector

Commuters, seen throughout a glass, arrive to Kadikoy ferry terminal in Istanbul, Türkiye, Thursday, Nov. 16, 2023. (AP Photo/Francisco Seco)
Commuters, seen throughout a glass, arrive to Kadikoy ferry terminal in Istanbul, Türkiye, Thursday, Nov. 16, 2023. (AP Photo/Francisco Seco)
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Türkiye's Clothing Makers Face Rising Costs from Push to Help Textile Sector

Commuters, seen throughout a glass, arrive to Kadikoy ferry terminal in Istanbul, Türkiye, Thursday, Nov. 16, 2023. (AP Photo/Francisco Seco)
Commuters, seen throughout a glass, arrive to Kadikoy ferry terminal in Istanbul, Türkiye, Thursday, Nov. 16, 2023. (AP Photo/Francisco Seco)

Turkish clothing manufacturers, the third-largest suppliers of apparel to Europe, face higher production costs and risk falling further behind their Asian rivals after the government hiked taxes on textile imports, sector leaders say.
Ankara raised tariffs by 30-100% on hundreds of incoming textile products last week, aiming to support local yarn and fabric manufacturers that appealed for support against a wave of cheaper imports.
Apparel officials say the new taxes are squeezing the industry, which is among Türkiye's biggest employers, supplying heavyweight European brands such as H&M, Mango, Adidas, Puma and Inditex.
Job cuts could come, sector representatives say, as import costs rise and Turkish producers shed market share to rivals like Bangladesh and Vietnam.
Exporters can technically apply for exemptions from the tax, but industry sources say the exemption regime is costly and time-consuming, and in practice does not work for many companies.
The sector was already fighting soaring inflation, waning demand and lower profit margins due to what exporters see as an over-valued lira, as well as the effects of Türkiye's years-long experiment with cutting interest rates as inflation rose, a policy recently revisited.
The price of a Turkish-made t-shirt is now 40% higher for a European shopper than one from Bangladesh, said Seref Fayat, chairman of Türkiye's TOBB Clothing and the Apparel Industry Assembly. A couple of years ago the gap was 15-20%, another source said.
"Fashion brands can bear higher prices up to 20%, but anything more leads to market losses", Fayat said.
Timur Bozdemir, president of DF Manhattan Inc, which manufactures women's garments for the European and US markets, said the new tariff will raise the cost of a $10 t-shirt by no more than 50 cents.
He does not expect to lose customers, but said the changes reinforced the need for Türkiye's apparel industry to shift from mass production to value-added.
"If we insist on competing with Bangladesh or Vietnam for a $3 t-shirt, no doubt we will lose," he said.
COMPETITIVE EDGE
Türkiye exported $10.4 billion in textiles and $21.2 billion in clothing last year, making it the world's fifth and sixth biggest global exporter respectively.
It is the second-largest textile and third-largest clothing supplier to the neighboring European Union, European Apparel and Textile Confederation (Euratex) data shows.
But its share of the European market slipped to 12.7% last year from 13.8% in 2021.
Western customers turned to Türkiye during the COVID-19 pandemic to cut freight costs amid supply disruptions.
When it ended, the combination of plunging shipping costs and rising domestic inflation dulled its competitive edge.
Textile and apparel exports fell more than 8% through October this year, while overall exports were flat, sector data shows.
The textile sector, facing a rise in cheaper imported fabrics and yarns which in part sparked the need for the tariffs, saw its number of registered employees falling 15% through August.
Its capacity utilization rate was 71% last month, compared to 77% in manufacturing overall, and sector officials say the rate is near 50% for many yarn manufacturers.
"I've almost stopped production and cut most of the jobs in my yarn facility - and I'm not the only one in this situation," said Fatih Bilici, who runs an Osmaniye-based yarn factory that supplies local and foreign markets.
His company cut daily production to 5 tons from 50 tons a few months ago. He said the tariffs are vital for an industry struggling to survive.
"It costs me $3.20/kg to manufacture, whereas my Uzbek rival sells it at $2.70. How can I can compete?".
The lira has shed 35% of its value to the dollar this year and 80% over five years. But exporters say the lira should depreciate yet more to better reflect inflation that is running above 61% and touched 85% last year.
TOBB's Fayat said the textile and apparel sector had cut 170,000 jobs so far this year. As monetary tightening cools an overheated economy, it is expected to hit 200,000 by year-end.


Britain's Burberry Hit by Slowdown in Luxury Spending

Foreign tourists speak to each other in front of logo of Burberry on a shop-window of closed Burberry retail store in the State Department Store GUM at the Red Square in Moscow, Russia, 13 November 2023. EPA/YURI KOCHETKOV
Foreign tourists speak to each other in front of logo of Burberry on a shop-window of closed Burberry retail store in the State Department Store GUM at the Red Square in Moscow, Russia, 13 November 2023. EPA/YURI KOCHETKOV
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Britain's Burberry Hit by Slowdown in Luxury Spending

Foreign tourists speak to each other in front of logo of Burberry on a shop-window of closed Burberry retail store in the State Department Store GUM at the Red Square in Moscow, Russia, 13 November 2023. EPA/YURI KOCHETKOV
Foreign tourists speak to each other in front of logo of Burberry on a shop-window of closed Burberry retail store in the State Department Store GUM at the Red Square in Moscow, Russia, 13 November 2023. EPA/YURI KOCHETKOV

Britain's Burberry said it was being hit by a global slowdown in luxury spending and it would struggle to meet its annual revenue forecast of low double-digit growth, with a knock-on impact on profit, if it continued.

The company, which launched the first collection by designer Daniel Lee in September, reported a sharp slowdown in comparable store sales growth in its second quarter to 1%, down from 18% in the first, as growth in China evaporated.

Rising inflation and economic uncertainty have curbed shoppers' appetite for luxury after years of blockbuster demand, prompting investors to trim forecasts, Reuters reported.

LVMH, the world's biggest luxury group with brands including Louis Vuitton, Dior, and Tiffany, reported a slowdown in quarterly sales in October, as did Kering with its Yves Saint Laurent, Balenciaga and Bottega Veneta brands.

Cartier-owner Richemont has also predicted an easing in growth.

Burberry said on Thursday that early indicators of demand for its Winter '23 collection were "encouraging", and it had achieved a good performance in the key categories of outerwear and leather goods in its first half.

Demand in China, however, fell away in the second quarter from a strong bounce back from the impact of COVID lockdowns. Burberry said spending by Chinese luxury consumers had shifted overseas from mainland China.

Tourist growth benefited European destinations, it said, with just over half of spending in the region coming from international visitors.

But a weak performance in the Americas worsened in the quarter, with comparable store sales down 10%.

Chief Executive Jonathan Akeroyd said: "While the macroeconomic environment has become more challenging recently, we are confident in our strategy to realize our potential as the modern British luxury brand, and we remain committed to achieving our medium and long-term targets."


LVMH's Berluti to Design Olympics Opening Ceremony Uniforms for French Teams

FILE PHOTO: The new logo of Paris 2024 Olympics is seen on a pin during a ceremony in Paris, France, October 21, 2019. REUTERS/Pascal Rossignol/File Photo
FILE PHOTO: The new logo of Paris 2024 Olympics is seen on a pin during a ceremony in Paris, France, October 21, 2019. REUTERS/Pascal Rossignol/File Photo
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LVMH's Berluti to Design Olympics Opening Ceremony Uniforms for French Teams

FILE PHOTO: The new logo of Paris 2024 Olympics is seen on a pin during a ceremony in Paris, France, October 21, 2019. REUTERS/Pascal Rossignol/File Photo
FILE PHOTO: The new logo of Paris 2024 Olympics is seen on a pin during a ceremony in Paris, France, October 21, 2019. REUTERS/Pascal Rossignol/File Photo

Luxury giant LVMH's Berluti brand will design the summer Olympics and Paralympics opening ceremony uniforms for the French teams, boosting the profile of the upscale menswear label known for buffed leather shoes and tailored suits.

"We aim to marry elegance and performance," said Berluti chief executive Antoine Arnault, one of the five children and heirs of LVMH Chairman and CEO Bernard Arnault.

Antoine is credited with negotiating LVMH's 150 million euros ($166 million) worth Olympics sponsorship deal initially announced in July, Reuters reported.

The Olympic games kick off on July 26, followed by the Paralympics on August 28 -- high profile ceremonies that are watched by millions of people across the world.

Paris, which has hosted two previous Olympics, will stage the summer Games after 100 years. The event is expected to draw huge spectator, TV and streaming audiences after the 2020 Games in Tokyo were marred by the pandemic.


Giorgio Armani Fashions His Own Legacy with Succession Plan 

The 80th Venice Film Festival - Armani fashion show "One Night Only" - Venice, Italy, September 2, 2023 - Designer Giorgio Armani attends his event "One Night Only", a special fashion show to celebrate cinema. (Reuters)
The 80th Venice Film Festival - Armani fashion show "One Night Only" - Venice, Italy, September 2, 2023 - Designer Giorgio Armani attends his event "One Night Only", a special fashion show to celebrate cinema. (Reuters)
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Giorgio Armani Fashions His Own Legacy with Succession Plan 

The 80th Venice Film Festival - Armani fashion show "One Night Only" - Venice, Italy, September 2, 2023 - Designer Giorgio Armani attends his event "One Night Only", a special fashion show to celebrate cinema. (Reuters)
The 80th Venice Film Festival - Armani fashion show "One Night Only" - Venice, Italy, September 2, 2023 - Designer Giorgio Armani attends his event "One Night Only", a special fashion show to celebrate cinema. (Reuters)

Giorgio Armani has always kept a tight grip on the firm he founded, and the Italian fashion king's attention to detail extends to clear rules on how it should be run after his death.

Armani, 89, remains CEO and effectively sole shareholder of the business he set up with his late partner in the 1970s, which had a 2.35 billion euros ($2.5 billion) turnover last year.

With no children to pass it on to, there has been speculation about the long-term future of Armani's empire and whether, in an industry dominated by luxury conglomerates, it will be able to maintain the independence he treasures.

But a hitherto obscure document from 2016, held by a notary in Milan and reviewed by Reuters, sets out the future governing principles for those who inherit the group, while another details issues including protecting jobs at the firm.

The first document explains how his heirs should approach a potential stock market listing - though not until five years after his passing - and any potential M&A activity.

For the Armani look itself, the document commits them to the "search for an essential, modern, elegant and unostentatious style with attention to detail and visibility".

The document is the product of an extraordinary meeting that Armani called in 2016 to adopt new bylaws for the group which would come into force upon his death.

SUCCESSION PLAN

Armani's heirs are expected to include his sister, three other family members working in the business, long-term collaborator Pantaleo Dell'Orco and a charitable foundation.

The bylaws divide the company's share capital into six categories with different voting rights and powers, and were amended in September to create some without voting rights.

The Armani group, which as well as the CEO also represents the family members mentioned in the document, declined to comment on the document or its contents.

It is not clear from the document how the different blocs of shares will be distributed, but corporate governance experts say the guidelines should ensure a relatively smooth transition by giving the board a central role.

"It is an organization that reduces the margins for disagreement between the heirs," Guido Corbetta, professor of Corporate Strategy at Milan's Bocconi University, told Reuters.

Armani has a younger sister, Rosanna, two nieces, Silvana and Roberta, as well as a nephew, Andrea Camerana. Dell'Orco is also considered part of the family.

All are currently board members and, apart from Rosanna, all work for the Armani group.

Silvana and Dell'Orco are heads of design, working closely for decades with Armani, who dubbed them his "lieutenants of style".

The 2016 bylaws set the process for how the board will appoint future women's and men's style directors in a company known for its classic tailoring.

Roberta is Head of Entertainment & VIP Relations, while Camerana is sustainability managing director.

Other fashion groups including LVMH, Europe's most valuable luxury company, also have succession issues, with the five children of LVMH CEO and Chairman Bernard Arnault all having key management roles at brands in the empire.

LASTING LEGACY

Armani also created a foundation in 2016 which currently has a tiny symbolic stake but is earmarked to play a pivotal role in protecting the business he set up with Sergio Galeotti before going it alone when his partner died in 1985.

Its purpose is to reinvest capital for charitable causes and to maintain Armani's lasting influence over the group.

The foundation's bylaws, which were also seen by Reuters, call for it to manage the shareholding with the aim of creating value, maintaining employment levels and the pursuit of company values. The Armani group has almost 9,000 employees.

The arrangement has echoes of one adopted by Rolex founder Hans Wilsdorf who left the brand to a foundation in 1960 that still owns the luxury watchmaker.

Armani has always defended his firm's independence and ruled out a merger, especially with the French groups that swallowed up Italian brands such as Gucci, now owned by Kering.

The group bylaws include a "cautious approach to acquisitions aimed solely at developing skills that do not exist internally from a market, product or channel point of view".

They also provides for the distribution of 50% of net profits to shareholders.

Any eventual stock market listing requires the favourable vote of the majority of directors "after the fifth year following the entry into force of this statute".

The Armani group declined to comment on a potential listing in the mid-term.

"The founding principles show Armani's desire to transmit and prolong his idea of a company, of business, there is a desire for eternity," Bocconi professor Corbetta said.

Despite his meticulous planning, whether Armani's aims outlast him will ultimately be beyond his control.

"They (the rules) could restrict the company a little and become incompatible with drastic changes in the market," Corbetta said.


Catherine Deneuve Opens Paris Store Printemps' Holiday Display

French actress Catherine Deneuve poses as she takes part in the Christmas window display ceremony at the Printemps Haussmann department store in Paris on November 9, 2023. (Photo by Miguel MEDINA / AFP)
French actress Catherine Deneuve poses as she takes part in the Christmas window display ceremony at the Printemps Haussmann department store in Paris on November 9, 2023. (Photo by Miguel MEDINA / AFP)
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Catherine Deneuve Opens Paris Store Printemps' Holiday Display

French actress Catherine Deneuve poses as she takes part in the Christmas window display ceremony at the Printemps Haussmann department store in Paris on November 9, 2023. (Photo by Miguel MEDINA / AFP)
French actress Catherine Deneuve poses as she takes part in the Christmas window display ceremony at the Printemps Haussmann department store in Paris on November 9, 2023. (Photo by Miguel MEDINA / AFP)

French actress Catherine Deneuve kicked off the holiday shopping season in Paris on Thursday, presiding over a ribbon-snipping ceremony for the Christmas window displays of department store Printemps.
The Boulevard Haussmann store was outfitted with tags that fluttered under the awning, while puppet seagulls and owls made of paper flapped in the windows among piles of wish lists, Reuters reported.
"It's a very poetic idea," Deneuve said, of the store's displays.
European retailers are entering the crucial end-of-year season after a difficult September, which was unusually warm, making it hard to sell winter collections as rising living costs have cut spending on fashion and accessories.
Cooler weather in October and November contributed to a rebound in sales, however, according to Stephane Roth, general manager marketing, communication and architecture of the Printemps group.
Deneuve, 80, who plays the role of former French lady Bernadette Chirac in the satire film "Bernadette" released this year, said she had not started planning the holidays, which she usually spends in the countryside with family.
"I've not prepared anything --it's only November," Deneuve told Reuters, adding that she keeps large boxes of decorations for her Christmas tree, which she likes to reach the ceiling.
As for holiday meals, Deneuve said it was best to "stick with the classics", including foie gras and chestnuts.


Global Fashion Brands Say to Raise Purchase Prices for Bangladesh-made Clothes

Garment workers gather along a road during a protest in Gazipur on November 9, 2023, after the Minimum Wage Board authority declared the minimum wage of 12,500 taka ($113) for garment workers. (Photo by AFP)
Garment workers gather along a road during a protest in Gazipur on November 9, 2023, after the Minimum Wage Board authority declared the minimum wage of 12,500 taka ($113) for garment workers. (Photo by AFP)
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Global Fashion Brands Say to Raise Purchase Prices for Bangladesh-made Clothes

Garment workers gather along a road during a protest in Gazipur on November 9, 2023, after the Minimum Wage Board authority declared the minimum wage of 12,500 taka ($113) for garment workers. (Photo by AFP)
Garment workers gather along a road during a protest in Gazipur on November 9, 2023, after the Minimum Wage Board authority declared the minimum wage of 12,500 taka ($113) for garment workers. (Photo by AFP)

Global fashion retailers including H&M and Gap are committed to raising purchase prices for Bangladesh-made clothing to help factories there offset higher workers' wages, a U.S.-based association representing more than 1,000 brands said.
Bangladesh is the world's biggest garments exporter after China. This week, after deadly protests between police and factory workers, the government mandated an almost 60% raise to the minimum monthly wage to 12,500 taka ($113) from December, the first increase in five years, Reuters reported.
Factory owners had said the wage hike, which comes ahead of a January general election, would eat into their profit margins by increasing costs 5-6%. Labor accounts for 10-13% of total manufacturing costs, industry estimates show.
Asked if they would raise purchase prices by the 5-6% that costs will rise, Stephen Lamar, chief executive of the American Apparel & Footwear Association (AAFA), told Reuters: "Absolutely".
"As we and our members have reiterated several times now, we are committed to responsible purchasing practices to support the wage increases," Lamar said in an email.
"We also renew our pleas for the adoption of an annual minimum wage review mechanism so that Bangladeshi workers are not disadvantaged by changing macroeconomic conditions."
Low wages have helped Bangladesh build its garment industry, which employs about 4 million people. Readymade garments are a mainstay of the economy, accounting for almost 16% of GDP.
Even after the increase in minimum wage, which some workers said was too little, Bangladesh lags other regional garment manufacturing hubs such as Vietnam, where the average monthly wage is $275, and Cambodia, where it is $250, data from the International Labor Organization shows.
Last month, several members of the AAFA including Abercrombie & Fitch and Lululemon, told Bangladesh Prime Minister Sheikh Hasina they wanted worker wages to rise, and to take into account inflation, which is currently at 9%. Lamar also wrote to Hasina in July.
Retailers in the United States and Europe are the main buyers of Bangladesh-made clothes. Like most consumer goods retailers, fashion companies are grappling with high inventories and a slowing global economy, where shoppers in key markets are buying less as they feel the pinch.


Jewellery Maker Pandora’s Q3 Profit Falls Less Than Expected, Raises Sales Outlook 

People walk past a Pandora jewelry store in a Hollywood shopping center on October 26, 2023 in Los Angeles, California. (Getty Images/AFP)
People walk past a Pandora jewelry store in a Hollywood shopping center on October 26, 2023 in Los Angeles, California. (Getty Images/AFP)
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Jewellery Maker Pandora’s Q3 Profit Falls Less Than Expected, Raises Sales Outlook 

People walk past a Pandora jewelry store in a Hollywood shopping center on October 26, 2023 in Los Angeles, California. (Getty Images/AFP)
People walk past a Pandora jewelry store in a Hollywood shopping center on October 26, 2023 in Los Angeles, California. (Getty Images/AFP)

Danish jewellery maker Pandora on Wednesday reported a third-quarter operating profit above expectations and raised its full-year sales outlook.

Operating profit fell to 920 million crowns ($132 million)from a year-earlier 978 million, against a mean forecast in an analyst poll published by Pandora of 875 million, on organic sales growth of 11%.

Pandora said it now expected full-year organic sales growth of 5%-6%. Its previous forecast was for 2-5% growth. It maintained a full-year operating profit margin forecast of around 25%.


Adidas Reduces Inventory Levels More Than Planned 

Football - FIFA World Cup Qatar 2022 - Third-Place Playoff - Croatia v Morocco - Khalifa International Stadium, Doha, Qatar - December 17, 2022 General view of FIFA president Gianni Infantino's Adidas shoes during the medal ceremony. (Reuters)
Football - FIFA World Cup Qatar 2022 - Third-Place Playoff - Croatia v Morocco - Khalifa International Stadium, Doha, Qatar - December 17, 2022 General view of FIFA president Gianni Infantino's Adidas shoes during the medal ceremony. (Reuters)
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Adidas Reduces Inventory Levels More Than Planned 

Football - FIFA World Cup Qatar 2022 - Third-Place Playoff - Croatia v Morocco - Khalifa International Stadium, Doha, Qatar - December 17, 2022 General view of FIFA president Gianni Infantino's Adidas shoes during the medal ceremony. (Reuters)
Football - FIFA World Cup Qatar 2022 - Third-Place Playoff - Croatia v Morocco - Khalifa International Stadium, Doha, Qatar - December 17, 2022 General view of FIFA president Gianni Infantino's Adidas shoes during the medal ceremony. (Reuters)

Adidas said on Wednesday that inventory levels continued to decline in the third quarter as the German firm curbed its selling into wholesalers, while lower costs helped increase its gross margin.

Inventory levels were down 23% on the year to 4.85 billion euros ($5.18 billion), a little more than expected, Adidas said.

Adidas last month lifted its full-year guidance, partly thanks to the positive impact of the release of Yeezy shoes during the second and third quarter.

Adidas' gross margin for the quarter was up 0.2 percentage points, to 49.3%, thanks to reduced freight costs and less discounting.


Global Fashion Factories in Bangladesh Resigned to Slimmer Margins ahead of Wage Hike

Garment workers sew T-shirts at a factory in Dhaka, Bangladesh, in 2009. AFP/Getty Images
Garment workers sew T-shirts at a factory in Dhaka, Bangladesh, in 2009. AFP/Getty Images
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Global Fashion Factories in Bangladesh Resigned to Slimmer Margins ahead of Wage Hike

Garment workers sew T-shirts at a factory in Dhaka, Bangladesh, in 2009. AFP/Getty Images
Garment workers sew T-shirts at a factory in Dhaka, Bangladesh, in 2009. AFP/Getty Images

Several clothing factory owners in global fashion manufacturing hub Bangladesh are asking clients that include H&M to help them pay for an almost 60% government-mandated hike in wages, well aware that weaker sales might stymie their efforts.
Following a week of deadly clashes between garment industry workers and police over pay, the government on Tuesday said the minimum wage would rise by 56.25% to 12,500 taka ($114) a month from Dec. 1, the first increase in five years.
A panel of factory owners, union leaders and officials agreed to the increase unanimously, said Siddiqur Rahman, the owners' representative. Low wages have helped Bangladesh become the world's largest garment exporter after China, but soaring fuel and power prices have added to the spiraling cost of living for people in this developing South Asian nation.
Speaking to Reuters on Wednesday, Rahman said the wage hike - which comes ahead of a January general election - could be a "disaster" for an industry that accounts for almost 16% of GDP and generates more than $40 billion a year in export receipts.
Bangladesh is home to more than 4,000 factories that supply global brands ranging from fast fashion retailers such as Zara-owner Inditex and Gap Inc to the more upmarket Hugo Boss and Lululemon.
But like most makers of consumer goods, fashion retailers are grappling with high inventories and a slowing global economy, where shoppers in key markets are buying less as they feel the pinch. That has led to a 14% drop in Bangladesh's garment exports last month.
"The timing is not good," said Fazlul Hoque, managing director of Plummy Fashions and former president of the Knitwear Manufacturers & Exporters Association, about the wage hike.
"The industry is already struggling, order flow is slow, energy supply is not adequate and the overall economic situation is not good. In such a time, a big hike in wages certainly will be tough... but for workers, I agree it is a legitimate demand."
Hoque said the increase would add 5-6% to overall costs, a rise he and other factory owners have asked their clients to help shoulder by agreeing to higher rates. Labour accounts for 10% to 13% of their total costs.
He is not optimistic, however.
"In the past, we have seen that they increase only a bit, not enough to pay the extra cost," Hoque said. "There might be exceptions, but there are thousands of buyers, and not everyone will agree to cover the whole amount. There is no legal enforcement on the buyers."
Last month, several fashion brands including Abercrombie & Fitch, Adidas, Gap, Hugo Boss, Levi Strauss , Lululemon, Puma, PVH and Under Armour told Prime Minister Sheikh Hasina in a letter they were "committed to implementing responsible purchasing practices" to enable higher wages.
"We continue to recommend that the government of Bangladesh adopt an annual minimum wage review mechanism to keep up with changing macroeconomic factors," the letter said. In addition to the wage increase, the government has said that workers would be given a 5% annual increment.
Babul Akter, president of the Bangladesh Garment and Industrial Workers Federation, urged global brands to pay more, saying: "There could be some problems for the owners to cope with the increased salaries."
But Abdus Salam Murshedy, managing director of the Envoy Group that sells to Walmart, Zara and American Eagle Outfitter among others, said buyers were unwilling to pay the "right price, the fair price" with major economies slowing and the wars in Ukraine and in the Middle East raising geopolitical concerns.
"Words from buyers are fine but when they place orders, they say there are many other competing suppliers, so you better do this, do that," said Murshedy, who is also a lawmaker from Hasina's Awami League party.
"The industry needs to be able to pay for its costs. If there is no industry, where will the workers work?"