After the double-digit plunge in 2009, the industry started picking up, but the pace tempered in 2012, as the activity in the sector was negatively affected by diminishing external and local demand, which added to overall adverse market circumstances. Some producers managed to offset the overall declining demand by refocusing towards niche areas, such as industrial textiles. The clothing apparel production slid in the negative area last year, when it dropped by 2.2% y/y, after having inched up by 1.7% y/y in 2011.
The clothing production in 2012 was roughly at the same level as in 2009, when the industry’s output witnessed 25.5% y/y annual plunge. The companies are facing shrinking demand and smaller producers and exporters particularly are struggling with tighter time frames for completing small orders. Only few of the apparel producers have developed own brands and are present in the retail chains with clothing lines, as most of them continue to focus on orders under lohn system.
EXPORTS OF TEXTILES, CLOTHING, FOOTWEAR SHRINK 1.6% Y/Y TO EUR 5.2BN IN 2012
The exports of textiles, wearing apparel and leather goods dropped by 1.6% y/y to nearly EUR 5.2bn in 2012, as the sector was affected by shrinking external demand, in the context of the global economic crisis. The share of the sector’s exports also diminished to 11.5% of total exports in 2012, from 11.7% in 2011. The trade balance remained positive, at about the same level in the past two years (EUR 408.4mn in 2011 versus EUR 408.8mn in 2012), according to data from the Department for External Trade.
Imports dropped by a similar annual figure, to nearly EUR 4.8bn, in 2012, accounting for 8.7% of the country’s imports last year. The exports’ performance however varies widely across market segments. Exports of knitted or crocheted apparel declined marginally by 0.9% y/y in 2012, while exports of apparel not knitted inched up by 0.2% y/y last year. The two segments accounted for 2.1% and respectively 4.1% of the EU27 total exports value in 2012, roughly the same level as in the previous year, according to our calculations based on European Commission and Eurostat statistics. Exports of footwear, gaiters and similar products, on the other hand, dropped more abruptly, by 7.2% y/y to nearly EUR 1.3bn in 2012, accounting for 4.1% of EU27 total footwear exports last year.
The Romanian footwear producers export in over 150 countries and project some 5% y/y advance of external deliveries this year, according to projections of producers’ association Sfera Factor.
Italy remained the top export destination for major textile, apparel and footwear products in 2012. It accounted for 57.1% of footwear exports, 40.3% of total knitted textiles and 21.6% of total not knitted textiles in 2012. Other top destinations for textiles and apparel in 2012 were Austria and the United Kingdom, while footwear top 3 export destinations included Austria and Germany. Interestingly, even though China is cited as being among the top import countries for textiles, clothing and footwear, the country actually ranked 4th and 5th among import countries for the major categories last year. The top import source was Italy, while other major partners were Germany, Austria, Spain and Slovakia. …
YET TEXTILES INDUSTRY REMAINS ATTRACTIVE FOR FOREIGN INVESTORS
The foreign direct investments in textiles, apparel and leather industry advanced by 4.5% y/y to EUR 834mn in 2012, thus showing that the country remained attractive for foreign investors. The amount is at about the same level as in 2010 and above the EUR 717mn recorded in 2009, but the sector’s share in total FDI stock maintained at 1.4% in 2009-2012 except 2010, when the share was slightly higher, at 1.6%, according to data from the central bank.
DOMESTIC HOUSEHOLD SPENDING ON CLOTHING REMAINS AT LOW LEVEL IN 2012, YET RETAILERS MOVE ON WITH CHAIN EXPANSION
Monthly household spending on clothing and footwear accounted for 5% of total household spending in 2012, or RON 80 (EUR 18.1). The share in total household spending remained the same as in 2011, but the stake diminished considerably from 5.4% in 2010 and 6% in 2009.
The statistics regarding the turnover of retail trade with clothing, footwear and leather products shows no encouraging performance in 2012. The index returned in the negative area in 2012, after three years of positive annual performance, according to our calculations based on the revised and rebased official statistical series. Thus, the turnover index in the sector dropped by 17.5% y/y in 2012, following the 6.1% y/y advance in 2011.
Even though the household spending on clothing and footwear maintained at low level in 2012 and the retail turnover in the sector dropped at double-digit annual pace, the specialised retail chains moved on with expansion last year and in 2013, taking advantage of the more advantageous leasing terms and shopping centre expansion.
Particularly international clothing chains consolidated their position on the market, as they benefited of support from parent companies to back their expansion. On the other hand, Romanian apparel retailers are facing increasing difficulties and many of them filed for insolvency. The international retailers managed to alleviate the declining sales per store by enlarging their chains, but local companies could not secure financing for similar moves.
On the footwear market, Romanian companies continue to have a strong foothold. The major footwear retailers, some of whom are also producers, continued to account for the largest market share. Furthermore, the footwear producers started expanding abroad their retail chains. One example is Romanian footwear producer and retailer Musette, which plans to enter German and UK markets this year. The company already operates stores in Bulgaria, Austria, France, Israel and the USA.
LOCAL PRODUCERS FACE SUPPLY DETERRENTS, RISING COSTS, QUALIFIED LABOUR FORCE SHORTAGE
The companies in the textile industry continue to face problems regarding the raw material supply, rising production costs driven by higher energy prices, and the lack of qualified labour force, which add to diminishing external and domestic demand. The raw materials are imported, thus the exchange rate volatility impacting on the companies’ acquisition costs.
Most of the companies in the industry are small and medium-sized and thus more vulnerable to adverse market developments. The number of insolvencies in the sector reached 837 in full year 2012 and 364 in H1/2013, according to a study of credit risk firm Coface. Considering the stipulations of the new insolvency bill endorsed by the government in October 2013, the textiles industry will predictably record a rising number of bankruptcies in 2013 and 2014.
The number of companies active in textiles and wearing apparel manufacturing continued on downward path in 2008-2011, according to the latest official statistics available. The number of companies in textiles manufacturing reached 1,317 at end-2011, from 1,770 in 2008. Of the total number, 23 companies have over 250 employees, while 93 have between 50 to 249 employees. In the segment of wearing apparel manufacturing, the number of companies dropped to 4,111 at end-2011, from 5,867 in 2008. Of the total, 128 are large companies and 594 medium-sized.