Gap & Wal-Mart to scale down sourcing from India
GeekBoy
22 Nov, 2007, 1700 hrs IST,Shruti Sabharwal & Boby Kurian, TNN
BANGALORE: The US recession story is well on its way to Indian shores. The
$9 billion domestic garment export industry, already reeling under an
appreciating rupee and allegations of labour rights violations, is now being
hit by a slowdown in the US market, as consumer spend on clothing remains
sluggish in the run up to peak Christmas season sales.
In the past few weeks, several major retailers like Wal-Mart, Gap and Target
have said that they were not expecting the festive season rush to be the
same as every year. Some of them have warned of the bleak scenario
continuing well into next year.
According to sources, this could see some of these biggest fashion retailers
reducing their sourcing exposure to Indian vendors by 15-20% by value in the
current financial year. The list of American retailers limiting their
shipments may also include Abercrombie & Fitch, DKNY and Philip Van Heusen
(PVH), according to an industry source.
India's garment export sector, which according to Apparel Exports Promotion
Council data reported 7% growth by value in FY07, is most likely to return
flat figures for the current fiscal, industry observers added.
The $15 billion Gap Inc, marketers of brands like Banana Republic, Old Navy
and the namesake flagship, is expected to lower its sourcing from the Indian
sub-continent, which reportedly topped $1 billion in the previous calendar
year.
If sources are to be believed, Gap's shipments from the sub-continent,
including Sri Lanka and Bangladesh, during the calendar year 2007 would be
down to $700-750 million as it struggles with consumer footfalls in stores
across US. ET could not contact a Gap Inc representative in India despite
repeated efforts.
A senior executive at the Rs 950 crore Gokaldas Exports, the largest
domestic garment exporter, said the company will take a hit of at least $15
million (Rs 60-80 crore) in its annualised topline revenue on account of Gap
alone.
"In the last fiscal, Gap contributed 50% of our revenue. We see it drop by
almost 10% in the current financial year as Gap places smaller orders and
will not fully absorb the impact of appreciating rupee," a company official
said.
Gokaldas Exports, in which private equity Blackstone is a majority
stakeholder, is the biggest vendor to Gap Inc in India. Sources said, Gap,
which works with around 200 small-to-large vendors in this part of the
world, has been scaling down orders across the spectrum for many of its
brands, with the probable exception of Old Navy, as it is facing market
place fatigue even after a recent operational rejig.
The shipments to the US are also slowing down as many domestic vendors are
looking to re-negotiate price with their clients on the back of a soaring
rupee, which has whittled down the margins rather precariously. It is
believed that several US brands have refused to absorb the rupee impact and
are placing smaller orders citing a slow down. The volume-driven American
market accounts for almost 50% of country's garment exports that is likely
to remain flat in terms of value growth during FY08.
The industry observers claimed that the recession feeling appeared more real
with chains like Wal-Mart kicking off festive season discounts well in
advance this year. "Wal-Mart, which goes in for discounting from December
first week, has started it almost three weeks in advance this year," said an
exporter, who did not want to be identified. Wal-Mart's apparel sourcing
from India is estimated at around $400-450 million, sources added.
The US slow down fears are hitting India at a time when high-end European
brands like Diesel and Hugo Boss may be expanding their sourcing from India.
The latest fashion icons in Los Angeles like 7 For All Mankind and True
Religion, continue to source most of its apparels from US and the remaining
from Europe.
Straydog
Indians going to be in reverse-progress soon. Then we in the US can laught
at them just as they laughed at us for the last five years or more.
===== no change to below, included for reference and context =====
Triatomic Tortoise
"Straydog" <a...@panix.com> wrote in message
news:Pine.NEB.4.64.07...@panix2.panix.com...