2012: A year in review - Manufacturing winners and losers
Weak consumer spending, difficulties in securing credit, competition from China and the Far East resulted in factory closures and subsequent layoffs in 2012. But ramping up labour and sustainability standards, eco-friendly production technologies, cost cutting and efficiency improvements saved others from significant losses.
Multinational sporting goods giant Nike made positive moves to shrug off the bad PR associated with low cost sourcing, announcing it was "changing the rules of the game" in May, with a new factory rating system - the Sourcing & Manufacturing Sustainability Index. It brings labour and sustainability standards to the forefront when it comes to choosing factories making its products around the world. Earlier in the year, Nike also teamed up with Dutch textile machinery company DyeCoo Textile Systems BV, which claims to have developed and built the first commercially available waterless textile dyeing machines that use recycled carbon dioxide instead of water.
Levi Strauss & Co
Despite a less than noteworthy financial year, jeans giant Levi Strauss & Co tried to reduce its long term costs with technological innovation. In June, the company confirmed its commitment to improving water management practices, including a new method to produce jeans using significantly less water than in the past. This year, for instance, Levi's made more than 13m Water<Less products and saved over 172m litres of water. In October, the company launched a Waste<Less recycled jeans collection, which includes a minimum of 20% post-consumer recycled content of eight 12 to 20 ounce bottles per jean, which may assist green marketing.
The American apparel maker, which owns brands such as Tommy Hilfiger and Calvin Klein, had a good year. Led by progress at the Tommy Hilfiger brand, the apparel group also announced in August that it had raised its full-year guidance, with underlying revenue up 4% to US$1.3bn, and Q2 net profit up 31.5% to US$87.7m. PVH predicted revenue in fiscal 2012 would be up 1-2% on last year's total of US$5.9bn. It has also committed to invest in rising outsourcing star Bangladesh, revealing plans in March to commit US$1m to improving conditions in Bangladesh's garment factories, including plans to establish an in-factory training programme and set up factory health and safety committees.
Aggressive cost cutting, good order books, and improved efficiency helped the fortunes of Mauritius-based apparel giant Ciel Textiles - which produces garments for stores such as Marks & Spencer and Next in Britain, along with Spanish fashion chain Zara. Indeed it finished the financial year ending 30 June with significant net profits of MUR476m (US$15.6m), compared to MUR210.4m the previous year. The company said that 70% of its profits was generated from its international operations. Ciel Textiles currently has units in Mauritius, Madagascar, India and China.
Innovative textile and cellulosic fibre producer Lenzing began construction of its new plant in Lenzing, Austria this year, investing EUR130m (US$163m) to increase annual production of its Tencel fibres by around 67,000 tonnes. R&D and sustainability were also at the forefront for the company in the past 12 months, with a new "fine and luxurious" microfibre version of Lenzing's eco-friendly Edelweiss product launched in February, and new colour and black variants of its Modal fibres (which are said to be more eco-friendly because they no longer need to be dyed) released in September. Lenzing is currently promoting Modal's eco-friendly attributes to reflect its new production technology, which is CO2 neutral.
Sportswear giant Adidas confirmed in July that it would be closing its only company-owned Chinese apparel factory, which employs around 160 people. It also continued to face pressure in 2012 to make US$1.8m in severance payments to workers at a former Indonesian supplier factory, where its owner fled without paying wages. Related troubles cropped up for the firm in September, when Cornell University announced it was ending its eight-year contract with Adidas over what it describes as a 'gap' in the approach to worker rights following the non-payment to workers at the Indonesian factory. The move makes Cornell the first US university to terminate an agreement with Adidas over labour rights issues. Adidas-owned Reebok India also faced penal action and money laundering charges in August, for running unauthorised retail outlets as well as breach of export commitments.
Seardel Investment Corporation
South Africa's largest apparel and textile maker announced in February that it may be cutting up to 1,500 jobs at its factories in Western Cape and KwaZulu-Natal, as part of efforts to narrow losses at its clothing unit. The company's results for the six months leading up to the end of September 2011 single out the clothing segment for its "disappointing performance", with operating losses more than doubling, to US$6.6m, year-on-year. The company blamed increases in raw material and production costs as the reason for its reduced margins and declining volumes.
After 112 years in business, knit apparel manufacturer FesslerUSA announced in November that it would be winding down operations - a move that will mean the loss of around 130 jobs. Weak consumer spending, difficulties in securing credit, competition from China and the Far East, and lack of interest from private investors and potential buyers were all factors said to contribute to the manufacturer's downfall. Pennsylvania-based FesslerUSA's sudden closure ironically comes at a time where American industry experts are touting an oncoming surge of domestic production, and rises in sourcing closer to home.
While significant efforts were made to turn its business around, "significant losses continued to be incurred" in 2012 for luxury UK fashion brand Aquascutum, restructuring firm FRP Advisory said in April. The firm announced plans to close the company's Corby, Northamptonshire site, in a move that would make 115 staff redundant, saying that the manufacturing plant was "not viable to continue to trade due to loss-making operations and a lack of funding." In August, it was announced that leather goods company Swaine Adney Brigg would be taking over Aquascutum's former production facilities.
Australian clothing maker Pacific Brands announced in August that CEO Sue Morphet would be stepping down after the company saw full-year widen to AU$450.7m (US$472m) up from the AU$131.9m in losses year-on-year), and a fall in sales of 18% to US$1.3bn. The struggling company, which markets brands such as Clarks, Everlast and Hush Puppies, has taken a number of steps in recent years to try and turn business around, including cutting the number of brands in its portfolio to 40 key labels, and closing 11 manufacturing sites. Pacific Brands was also sued in January by Hong-Kong based supplier PD Enterprise after cutting the volume of bras it ordered from two factories.
An interactive databank with intelligence on the major apparel sourcing countries
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