|A women's fashion store in Nanjing, capital city of Jiangsu province. The majority of Chinese garment makers are approaching the inventory alarm line, according to the China National Garment Association on its official website. They have enough stock to sell for three years even if all the garment factories are shut down. [Photo/China Daily] |
Shenzhen-listed China Garments Co released its financial report two months ago, revealing it had a net loss of nearly 19 million yuan ($7.8 million) for the first six months. It was once a profitable company, recording 2 billion yuan in annual sales in 1999.
It is just one example of how bad business is for China's entire garment industry.
Amid factory closedowns and the relocation of investors to less costly countries such as Vietnam, the stockpiling of unsold inventory has risen to a critical height, due partly to the sluggish demand in the domestic consumer market.
In fact, the stockpile has been so huge that, according to the China National Garment Association on its official website, it will be enough to sell for three years even if all the garment factories are shut down.
CNGA reported that the majority of Chinese garment makers are approaching the inventory alarm line, including Chinese brand names such as Li Ning Co, Meters/bonwe and Xtep (China) Co.
The financial results of Meters/bonwe showed that as of Sept 30, 2011, the company's inventory amount was as high as 2.98 billion yuan, accounting for 83 percent of its net assets. Xtep's inventory grew by 92 percent to reach 887 million yuan last year.
Li Ning announced last month the dismissal of the company's chief Zhang Zhiyong. The news followed the Chinese athletic footwear and clothing giant's fall in sales and profit.
Last year, Li Ning's sales and net profit both dropped for the first time in the past 10 years. Revenue fell to 8.93 billion yuan, down 6 percent from 2010. Its profits plunged 65 percent to 358.8 million yuan.
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