Blog: Leonie BarrieSupply chain visibility challenges continue

Leonie Barrie | 29 February 2016

Has value fashion chain Primark identified where apparel retailers should be looking when it comes to finding new sources of efficiency? The business makes money by buying cheaply – and then exerting ruthless retail cost control and skilled in-store merchandising to constantly increase its sales per square foot.

Our comment coincides with a trading update from the retailer, which now expects full-year sales to be up 7.5% on a constant currency basis. Primark has seen profit margins improve in the first six months of its new fiscal year thanks to fewer promotions and better-managed stock.

With an ever-increasing slice of a company's value linked to its reputation, most apparel brands and retailers require a new set of disciplines and procedures to really understand what is going on in their global supply chains. And it’s a challenge that has amplified amid increasing supply chain complexity and regulatory proliferation.

To prove the point, Australian surf and ski-wear brand Rip Curl last week admitted it "screwed up," after some of its clothes were discovered at a factory in North Korea. The company blamed a supplier for diverting production to non-certified factories, but the discovery obviously raises serious questions about Rip Curl's sourcing practices.

German fashion brand Hugo Boss also says it has implemented a number of changes at its factory in Turkey and is working to resolve remaining issues after an audit by a labour rights group identified numerous violations.

And the Accord on Fire and Building Safety in Bangladesh has terminated business relations with four more suppliers after they failed to implement workplace safety measures.

Separately, the US has signed a bilateral trade and investment framework agreement with Laos, paving the way for the two countries to expand their trade and economic ties.

Apparel maker Gildan Activewear is planning to invest US$200m in 2016 to add new textile production capacity, complete its yarn-spinning manufacturing initiative, and expand its sewing facilities to support growth.

And US sporting giant Nike says it has completed the transition of all core yarn for its Flyknit shoes to recycled polyester.

Meanwhile, as fourth-quarter filings from US apparel brands and retailers continue to come in, our round-up of the results includes updates from L Brands, Skechers, Columbia Sportswear and Macy's – all of which saw sales improve. But Kohl's is to close 18 stores after reporting a 20% decline in profit, and JC Penney saw its loss widen.

And in other news, Ralph Lauren is axing the post of president of its global brands business; the Hong Kong government is investing HK$500m (US$64.35m) in its fashion sector; and German fashion retailer Gerry Weber is to close more than 100 stores and cut 250 jobs.


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