Bangladesh Garment Industry Short on Cotton as Floods Worsen Protest Backlog

FILE PHOTO: Women work in a garment factory in Dhaka, Bangladesh, May 3, 2020. REUTERS/Mohammad Ponir Hossain/File Photo
FILE PHOTO: Women work in a garment factory in Dhaka, Bangladesh, May 3, 2020. REUTERS/Mohammad Ponir Hossain/File Photo
TT

Bangladesh Garment Industry Short on Cotton as Floods Worsen Protest Backlog

FILE PHOTO: Women work in a garment factory in Dhaka, Bangladesh, May 3, 2020. REUTERS/Mohammad Ponir Hossain/File Photo
FILE PHOTO: Women work in a garment factory in Dhaka, Bangladesh, May 3, 2020. REUTERS/Mohammad Ponir Hossain/File Photo

Garment factories in Bangladesh, one of the world's biggest clothing production hubs, are struggling to complete orders on time as flooding disrupts their cotton supplies - exacerbating a backlog caused by recent political turmoil.
Bangladesh is a leading global cotton importer due to the size of its textile and garment industry, but the devastating floods mean few trucks and trains have been able to bring supplies to factories from Chittagong port over the last week, industry officials and analysts said.
The disruption, on top of the unrest and protests that led to factory closures earlier this month, have caused garment production to fall by 50%, said Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association.
"The industry is now under immense pressure to meet deadlines, and without a swift resolution, the supply chain could deteriorate even further," Reuters quoted Hatem as saying.
Bangladesh was ranked as the third-largest exporter of clothing in the world last year, after China and the European Union, according to the World Trade Organization, exporting $38.4 billion worth of clothes in 2023.
At the clothing factory she runs in the capital, Dhaka, Rubana Huq is counting the cost of lost production.
"Even for a moderate-sized company like ours, which makes 50,000 shirts a day and if the price of one single shirt is $5, there was $250,000 of production loss," said Huq, a former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
She said some garment plants were slowing resuming production, but estimated that complete recovery "would be at least six months away", warning that Bangladeshi manufacturers could lose 10%-15% of business to other countries.
Bangladesh's readymade garments industry, which supplies many of the world's best-known fashion brands, accounts for more than 80% of the country's total export earnings.
Buyers are adopting a cautious approach and could potentially delay new orders, said Shahidullah Azim, a director of the BGMEA industry group.
"The longer this uncertainty persists, the more challenging it becomes for us to maintain the momentum we have built," he told Reuters.
The Bangladesh Meteorological Department said flood conditions could persist if the monsoon rains continued, as water levels were receding very slowly.
Some cotton shipments could get diverted to India, Pakistan and Vietnam, commodity analysts said.
"We are already hearing and seeing some cotton for prompt delivery wanted by Pakistan and Vietnam," said Louis Barbera, partner and analyst at VLM Commodities based in New Jersey.
New orders shifted from Bangladesh could also be accommodated in southern India, said Atul Ganatra, president of the Cotton Association of India.
Even before the floods and political unrest, the Bangladeshi garment industry was grappling with power shortages that remain a problem, said Fazlee Shamim Ehsan, vice president at the country's knitwear manufacturers and exporters association.
"Energy shortages continue to hamper our operations," he said.



Uniqlo Owner Seen Posting 24% Annual Profit Surge on Brand’s Overseas Push

Fast Retailing's Uniqlo sign boards are displayed at a casual clothing store in Tokyo, Japan January 11, 2023. (Reuters)
Fast Retailing's Uniqlo sign boards are displayed at a casual clothing store in Tokyo, Japan January 11, 2023. (Reuters)
TT

Uniqlo Owner Seen Posting 24% Annual Profit Surge on Brand’s Overseas Push

Fast Retailing's Uniqlo sign boards are displayed at a casual clothing store in Tokyo, Japan January 11, 2023. (Reuters)
Fast Retailing's Uniqlo sign boards are displayed at a casual clothing store in Tokyo, Japan January 11, 2023. (Reuters)

The Japanese owner of casual wear giant Uniqlo is projected to beat its own forecast in what would be a third straight year of record profits as its brand makes inroads in western markets and its business in China recovers.

Fast Retailing's operating profit in the 12 months through August likely rose 24% from a year earlier to 478.3 billion yen, based on the average of 15 analyst estimates compiled by LSEG ahead of the company's earnings on Thursday.

That's marginally higher than the company's 475 billion yen forecast, which it lifted in July citing a strong performance in the second half.

Fast Retailing's shares have been on a tear, reaching a record high this week. Key factors going forward will be sales of fall and winter items in Japan and whether the company can reinvigorate its business in China, according to independent analyst Mark Chadwick.

"Investor attention will turn to whether Fast Retailing's measures in Greater China successfully reverse the earnings decline caused by weak consumer sentiment and increased competition," Chadwick wrote on the Smartkarma platform.

With more than 900 stores in China, Fast Retailing has long been seen as a bellwether for the retail sector in the world's second-biggest economy. COVID restrictions weighed on results there for years, but now the challenge is a sluggish economy that has weighed on consumer confidence.

Greater China CEO Pan Ning acknowledged in July that the market is maturing, with the company scaling back store openings and adopting a scrap and build strategy for underperforming locations.

When COVID lockdowns depressed sales in China, the company focused more on expansions in North America and Europe. Both sectors delivered strong sales and profits through the first nine months of fiscal 2024.

Company founder Tadashi Yanai aims to make Fast Retailing the world's biggest fashion retailer, with the operators of Zara and H&M standing in the way. He believes consumers are more focused on value than luxury in a post-COVID world, a trend that works in Uniqlo's favor.

Yanai, Japan's richest man, is scheduled to speak at the company's earnings briefing on Thursday, as well as Uniqlo president Daisuke Tsukagoshi, whom Yanai has spoken of as a possible successor.

Fast Retailing's shares have climbed 43% so far in 2024, outperforming a 16% advance in the benchmark Nikkei index.