The acquisition of apparel retailer Aeropostale in 2016 led to a new trend of landlords acquiring tenants. In the past several months, the Simon Property Group has acquired a slew of retailers like the Lucky Brand, acquired in partnership with Authentic Brands. Brookfield Property Group took over the brand Forever 21 earlier this year.

Financial gains lure property owners to retail

As per a Retail Dive report, there are many reasons behind landlords acquiring tenants these days. One of the most fundamental amongst these is to make money, says David Simon, CEO, Simon Property Group, which along with Brookfield bought JC Penney in November last year. The acquisition helped the group boost JC Penney’s pre-COVID sales to $9 billion. Another reason, property owners look to own their tenants is to preserve rent—the most important revenue source for a mall REIT. It also help them maintain a broader tenant base, says Michael Brown, Partner-Consumer and Retail Practice, Kearney.

Bradley Tisdahl, Founder and CEO, Tenant Risk Assessment adds acquiring a failing retailer also offers accounting advantage for a REIT. It allows the mall operator to control the retailer’s net operating losses (NOLs).

Emerging scenarios

However, for mall operators, owning their retailers can lead to two scenarios. It could either lead them to offer favorable lease terms to own retailers or encourage them to shut retailer’s stores in rival malls. This could lead to rival mall’s elimination from the market, which may encourage the surviving mall to raise prices.

Earlier, malls used to be anchored by department stores. However, now they are being replaced by specialty players, off-price stores, big boxers and Amazon. Apparel stores like Gap and department stores like Macy’s are opening shops at strip malls and open-air centers. This has led to two mall REITs, CBL and Preit filing for bankruptcy withom 24 hours of each other. Property owners like Simon and Brookefield are also under a lot of stress, says a report from S&P Global Market Intelligence.

Brookfield Property Partners aims to solve this problem by going private. This would offer them more flexibility to operate their portfolio besides enabling it to realize asset value, adds Nick Goodman, Chief Financial Officer, Brookfield Asset Management.

Besides their incomes being untaxed, the rules for mall REITs are designed for passive investments, says Nick Egelanian, President, SiteWorks. This boosts their partnership with retailers, adds Matthew Katz, Managing Partner, SSA & Company, which advises companies on strategic execution. However, this deviates from the REIT’s original function of owning and managing properties. REITs venture into this business to ensure a steady flow of their revenues. However, by doing this, they also put their stable rents at risk.

Despite a consistent 10 per cent annual growth over the past few years, India’s retail sector has not been able to achieve the same level of growth as Malaysia and Thailand. Now, the pandemic has forced around 7 lakh small retailers to permanently shut down operations, reports Economic Times. Though the Indian government has launched several initiatives to boost the sector’s growth in past decade, it needs to introduce a cohesive National Retail Policy that promotes inclusive growth amongst all key players.

The report says the policy needs to introduce a single window clearance system for retailers planning to open a new store. It also needs to digitalize the approval process to make it more speedy and transparent. Also, the process needs to be time bound and easily renewable. The government can also use e-governance and digital tools for inspection/audits to make the process more efficient.

The policy should also focus on launching flexible loans for kiranas, partnering Finetech startups to assess credit worthiness and incentivizing organized players to extend credit to smaller players.

Digitization to help double retailers’ profitability

Digitization can help traditional retailers grow revenues by around 30 per cent. It can also double their profitability. However, the digitization process is often hampered by a lack of capital, capabilities, and awareness. Government can help such retailers by launching new digital solutions and providing them tax breaks or subsidies for adopting digital tools. With an investment of Rs 12,000 crore, the government can modernize over 10 lakh retailers. It can also encourage private players / start-ups to collaborate with traditional traders to further increase their reach.

Infra development to reduce cost

Lack of efficient warehousing, cold-storage, and transportation facilities often increases the overall logistics costs of Indian products by around 5 to 8 per cent than global counterparts. Therefore, the National Policy needs to invest in the development of new warehouses, cold storage and other logistics-related infrastructure. This will reduce retailer’s costs by up to 2 percentage points besides improving their service to consumers.

Simplfy labor laws

India’s current skilling programs fail to provide employment to laborers. The policy to needs to clarify and simplify laws related to part-time and gig retail workers. It needs to encourage flexible work hours and part-time work. The policy also needs to incentivize employers to implement comprehensive childcare systems which would help improve women participation in retail by 5-10 per cent points. Scaling up skilling programs and vocational courses can also the government upskill India’s workforce.

As the retail industry has a major impact on the Indian economy. Its growth policy needs to be simple, standardized and digitized. This will not only create 30 lakh more jobs but also help the sector realize an additional growth of up to 2 per cent by 2024.

Indian manufacturer of textile machines, ATE has entered into an exclusive partnership with Sieger Spintech Equipments to sell its products and solutions in India. Based in Coimbatore, India, Sieger offers many kinds of hi-tech textile machinery and textile engineering solutions.

Sieger’s range of products includes innovative automation solutions for the textile industry and tailor-made solutions for textile material handling from roving transportation to garments. Sieger also offers systems and solutions for roving transport from simple loop to automatic creel change systems.

Sieger’s product portfolio also includes an automatic cone packing system which has modules for weighing balance, buffer storage, cone labelling, wrapping, and bagging or boxing (both packing options are also possible).

Sieger offers a variety of solutions for yarn conditioning such as the latest generation, power saving YCP NG UF (pit not required), and the fully automatic YCP NG HI cubical palette yarn conditioning plant with and without pre-conditioning chambers.

Additionally, Sieger also provides automatic overhead travelling cleaners, designed with state-of-the-art aerodynamic CFD. Sieger’s ADOF is an advanced doffing system with a doffing speed of less than 90 sec with minimum start-up breaks.

The value of Canada’s RMG imports declined by 14.20 per cent in 2020. The country imported $ 8.67 billion worth of garments in the pandemic-hit year down from $ 10.10 billion in 2019.

Knitted clothing constituted $ 4.37 billion in total Canadian apparel imports, declining 18.03 per cent in 2020 from 2019, while the fall registered by woven clothing segment was 9.89 per cent valuing US $ 4.30 billion.

The fall in import of woven clothing was less than the fall noted in knitted category which is somehow surprising as the other major apparel markets in the world have experienced a rise in demand in knitted clothing, especially in the second half of the year, owing to pandemic which led world’s population working remotely or opting for work from home system.

Particularly in December ’20, Canada’s import valued $ 629.90 million which was down by 8.96 per cent on Y-o-Y basis.

A new wave of COVID-19 lockdowns and patchy national vaccine rollouts are puncturing recovery hopes of apparel retailers. As per a Reuters report, McKinsey forecasts a 15 per cent sales drop in 2021 while Euromonitor expects recovery to be around 11 per cent. According to these analysts, retailers are still holding last year’s unsold inventories like Primark which has around stock worth £150 million from 2020 spring/summer and £200 million pounds from autumn/winter.

McKinsey estimates the value of unsold stock at around €140-160 billion. Hence, this year retailers are keeping volumes small and lead times tight, says Ron Frasch, Former President, Saks Fifth Avenue. Hong Kong-based sourcing agent Li & Fung, which manages more than 10,000 factories in 50 countries for retailers including global players, says though some retailers had requested late payment terms but declined to provide specifics. 

Fifty factories surveyed by the Bangladesh Garment Manufacturers and Exporters  Association reported receiving 30 per cent fewer orders than usual this season, as pre-Christmas lockdowns in Europe followed by another clampdown in January hit their businesses hard.

Some retailers are also trying to sell off as much of their excess stock as possible before placing new orders, said, Raffy Kassadiian, CEO, Parker Lane Group .

As per a Korean Herald report, henceforth, apparel and clothing items produced in Vietnam with South Korea-made fabrics will face lower tariffs in the European Union as they would enjoy the benefits of the Vietnam-EU free trade agreement. Previously to enjoy these benefits, clothes needed to be made with locally produced fabrics, reveals Ministry of Trade, Industry and Energy. The new amendment will create stronger demand for South Korean products compared to other rival producers such as China and Taiwan.

Vietnam imports around 80 per cent of its textiles. In 2019, the country imported 55 per cent of its fabrics from China, followed by South Korea and Taiwan at 16 and 12 per cent, respectively. Japan accounted for 6 per cent. Last year, South Korea shipped fabrics worth $2.35 billion to Vietnam a 18.4 percent year-on-year decline.

Accusing some customs officers of refusing to believe that textile exports for recycling have originated from UK, Textile Recycling Association (TRA), has raised the matter with the Department for Business Energy and Industrial Strategy. Although the Brexit deal allows goods that originate in the UK to be exported tariff-free to the EU, disputes have arisen over whether textiles exported for recycling originated in the UK or where they were manufactured.

TRA argues, the garment origin is irrelevant in terms of the Brexit deal. When garments arrive in the UK, they are then bought by consumers and potentially used for years by the original buyer or later ones before being deposited for reuse or recycling.

They will then be sorted in the UK or exported for sorting and processing abroad using a specific export product code for worn clothing and worn textile items. This meant they have legally become a new product while in the UK, and so it can be declared as the country of origin.

Demand for home textiles used for furnishing residence, towels, bedsheets, pillow covers and table linens is recovering as the fear of COVID pandemic subsides with the launch of vaccine.

The reopening of hotels and motels has spurred demand for bed linen as customers have become more picky about the freshness of bed linen in COVID times.

This has led to most textile companies registering strong recovery in the third quarter of this fiscal. These companies expect the demand uptick to continue in the March quarter as the demand in the domestic market is also picking slowly.

However, the import duty of 10 per cent on raw cotton imposed in the Union Budget may push up the cost of textile companies and impact their margins. The levy of import duty on cotton will push up cost of extra long staple cotton such as GizaCotton from Egypt and Supima Cotton from the US and makes India lose ground on premium textile exports.

Target’s activewear brand All in Motion has reached $1 billion in sales. Launched a year ago, the brand offers sports bras, hand weights and yoga mats, says a report by CNBC. It is one of 10 Target brands that generated $1 billion or more in sales in fiscal 2020.

Over the past five years, Target has launched more than 30 private-label brands in clothing, home and other categories to and differentiate itself from competitors and boost profitability. Four of these brands hit $2 billion or more in sales last year: kids apparel brand Cat & Jack; Good & Gather, a food and beverage line; Up & Up, a personal care and household essentials brand; and home decor brand Threshold.

The growth of these labels has helped Target gain $6 billion in market share in the first three fiscal quarters of the year. Its apparel sales have increased by nearly 10 per cent in the third quarter of this fiscal from a year earlier.

The company is confident of outpacing sales of higher-end athleisure and apparel brands. It plans to stick to its formula of developing exclusive products with quality and style, but with more inclusive sizing and lower prices.

Lectra plans to acquire the entire capital and voting rights of US-based Gerber Technology. As per Textile Network, the acquisition would complement Lectra’s market position and enhance its offerings based on Industry 4.0 technology.. After the consultation of the French work council of Lectra is consulted and signing of the binding documentation, the acquisition shall remain subject to merger control clearance and other customary conditions and shall be submitted to Lectra shareholders for approval.

The acquisition will make Lectra and Gerber Technology the ultimate Industry 4.0 for their customers. The strategic combination of Gerber Technology and Lectra will create a premier advanced technology partner, able to quickly meet changing customer needs and deliver even more value through seamlessly integrated solutions. Together, the two companies will have a large installed base of product development software and automated cutting solutions in operation, with a worldwide presence and a long list of prestigious customers.

Consolidating the two companies’ research and development capabilities will enable the combined company to accelerate development of Industry 4.0 technologies and help its expanded customer base seize the full potential of these innovations.