Blog: Leonie BarrieNike makes a rare stumble

Leonie Barrie | 2 July 2012

Sportswear giant Nike has made a rare stumble in its fourth quarter after higher product and marketing costs took their toll on margins and offset the largely positive effects of higher sales, price increases and cost reduction initiatives. And the company last week admitted that some of these headwinds are likely to linger.

During the three months to 31 May, profit fell 8% to $549m, as gross margin dropped 150 basis points to 42.8%. But while revenues rose 12% to $6.5bn, selling and administrative expenses grew at the same 12% rate to $2bn.

Meanwhile, global retail giant Uniqlo has become the latest company to agree to phase out the use of wool from sheep that have been mulesed. The casual clothing chain joins other international retailers such as C&A, Topshop, H&M, Hugo Boss, Abercrombie & Fitch, Timberland and Gap that have pledged to take action against the practice.

And it emerged that retail giant Inditex, owner of the Zara fast fashion chain, sourced from more non-EU European suppliers during 2011, and cut the number of suppliers it used in Asia over the year. According to its annual report, the retailer added some 22 non-EU European suppliers last year - a rise of 19% to account for some 9.3% of its supply base.

However, new research from just-style suggests emerging Asian countries hold the key to the future of the global apparel sourcing industry - with the focus falling on Bangladesh, Vietnam, Cambodia and Pakistan.

Indeed, the latest US figures suggest that garment customers may have settled down to a new but stable order of strategic suppliers - with China's market share on the rise again, and other winners in the first four months of this year including Vietnam, Cambodia, Nicaragua, El Salvador and Sri Lanka.

The US is also taking steps to end uncertainty for apparel and textile firms sourcing from sub-Saharan Africa and Central America after Congress agreed to advance bills containing "critical fixes" to two key trade agreements. The proposals to renew third-country fabric provision under the African Growth and Opportunity Act (AGOA), and modify some of the textile rule of origin provisions under the Dominican Republic-Central America Free Trade Agreement (DR-CAFTA), could be fast-tracked ahead of the month-long recess lawmakers take in August.


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