Propelled by growing health and wellness trend, the global functional apparel market is forecast to reach $519.04 billion by 2027. A new report by Reports and Data indicates, rise in the number of people engaging in fitness activities and outdoor adventures like hiking, cycling etc, works as a growth driver for global functional apparel market. Future growth is also likely to be driven by rising youth participation in various sporting activities.

Health consciousness to fuel market growth

Growth will also be fuelled by growing health consciousness amongst individuals and their willingness to engage in sporting activities to combat ailments. Functional apparels are mainly produced using compression technologies. As per a Textile Value Chain report, this helps application of a controlled surface pressure across body parts, thus accelerating blood flow, increasing oxygen supply to muscles and improving their efficiency. A person can work out for a longer duration by achieving a balance of these factors.

A factor restricting market growth is the high prices of these garments. As manufacturers use modern technologies to make these garments lighter and more durable, they tend to be more expensive than other apparels. Also, growing number of duplicates of these garments at lower prices, is expected to restrict future growth.

COVID-recovery to boost demand

The pandemic led to a major downturn in the functional apparel market that is expected to continue over the next few years. Asia Pacific market was the most affected by the outbreak, with China emerging as the epicenter of the crisis. It led to the temporary halting of initiatives introduced by the industry in many countries. It also halted production and supply in many countries, causing huge losses to manufacturers, dealers and consumers. Currently, even though the market might be facing downhill, improvement in the COVID situation could cause demand to hit the roof soon.

Key findings

Accounting for $46.81 billion in 2019, the professional athletic apparel market in North America is anticipated to grow to $80.37 billion. Growth can be attributed to changing lifestyles of athletes and increased participation in sports.

Designed to enhance comfort, athletic footwear helps eliminate injuries and improve athlete’s efficiency. The market is driven by rising foot allergies and diseases amongst sportsperson who are demanding athletic shoes and socks with advanced features. Textile industry manufacturers are launching hosiery goods by incorporating new cutting-edge technologies into their processes.

Growing hypermarket culture

The global functional apparel market growth is also being driven by increasing hyper-super/supermarket culture which enables buyers to purchase at competitive rates. Supermarket stores are also known to make practical fashion items, both branded and private labels for consumers.

Future market growth is likely to be driven by growing demand for eco-friendly products. Rising health and environmental consciousness is leading to new and innovative fabrics being launched. Brands are launching fabrics with technical features including anti-bacterial material and sweat-absorbent properties. Innovations are being done by big brands like Nike, Adidas, Asics, Hanes Brand, Reebok, Jockey, Russell Brands etc.

Despite a decline in international cotton prices over concerns of economic recessions, cotton prices in India increased 7.65 per cent from Rs 85,000 per candy on July 20 to Rs 91,500 per candy in early August. Pakistan’s cotton prices also surged 22.4 per cent to Rs 19,200 per maund during the same period. The rise in Pakistan’s cotton prices can be attributed to the strengthening of the US dollar against the Pakistani rupee.

Heavy rains affect new cotton crops

Heavy rainfalls lashed three major cotton producing areas in India in the second week of July, causing floods in major areas. This affected crops on 1.07 million hectare, as per a report by the Department of Agriculture. These mainly included cotton and soyabean crops. Not having planted cotton crops for two consecutive weeks, the Department of Agriculture is arranging subsidies for affected farmers.

Festive season to spur demand

The festive season from August till January is likely to spur local cotton demand. With zero restrictions, this festive season is expected to be different from the past two years this year, says Retailers Association of India. Already, retailers across India reported an average growth of 24 per cent in May this year compared to May 2019.

Rise in interest rates by the US is causing depreciation in the value of the Indian rupee. Also, energy prices have skyrocketed due to the Russia-Ukraine war leading to a decline in India's foreign exchange reserves. Data released by the Reserve Bank of India on July 29 shows, India’s forex reserves with the Reserve Bank decreased to $571.56 billion in July 22

New settlement rates hits cotton imports

As per the USDA’s weekly export report, US exports of upland cotton to India declined to 9 kt in 2022-23 from 113 kt in 2021-22. India’s foreign exchange reserve has gradually reduced and the country currently faces a deep trade deficit. To stabilize exchange rate, the Indian government introduced rupee international settlement rate, which further hit its cotton imports. New crops in the cotton market are yet to arrive and current production also remains uncertain. Cotton consumption in the domestic market has improved though it is unlikely to have any major effect on the global market.

Floods caused by heavy rainfall have affected main cotton producing areas across India. Status of new cotton planting has not been announced by the Department of Agriculture, causing further market concerns. Rising demand for cotton textiles and garments are driving up cotton prices further. However, the rapid decline in India's foreign exchange reserves has impacted cotton imports. In future, the US Fed is likely to again raise the interest rates further impacting India’s cotton imports.

The Council for the Development of Cambodia has approved three new investment projects with a capital investment of $15.7 million to boost job prospects in the garment and yarn sectors of the country

As per a Khmer Times report, the three projects have been approved in Kampong Speu province and Phnom Penh.

The newly approved garment and yarn factories are Jade Fashion (Cambodia) Garments Company, Hong Yu Fang Garment Co. and Shun Wei Fang ZhiKeJi Co., Ltd.

According to estimates, the projects would help create around 2,279 jobs for the people in the country.

Jade Fashion plans to establish a garment tailoring factory in Phnom Penh, while Hong Yu Fang’s garment tailoring unit is scheduled to be opened in Kampong Speu province.

Meanwhile, Shun Wei Fang’s yarn production factory would also be based in Kampong Speu province.

A report earlier this month showed that the country’s garment, footwear and travel goods industry posted a 40 percent increase in exports in the first half of 2022.

The Kingdom exported products worth $6.6 billion during the January-June period in 2022, compared to exports valued at $4.72 billion for the same period last year.

The Ministry of Commerce’s undersecretary of state and spokesman Penn Sovicheat attributed the growth to the full resumption of socio-economic activities in the country, free trade agreements, and a rise in global demand.

As a sign of commitment to animal welfare Copenhagen Fashion Week has banned the use of fur and fur garments in this year’s show.

The fur ban has become a global movement after many prominent fashion houses, including Gucci, Versace, and Prada, as well as global brands such as Michael Kors and Tommy Hilfiger, make the switch to 100 per cet fur-free fashion.

All over the world, fashion weeks are one of the highlights for designers, buyers, and the public. The decision to ban fur on the catwalk follows changes in consumer preferences and growing activism against animal cruelty in fashion.

In 2018, London Fashion Week became the first fashion week to ban fur on the catwalk, followed by Finland’s counterapart, which even went one step further and banned all animal products, including animal leather, from 2019. In response to growing consumer demand for more animal-friendly fashion, the organizers of Amsterdam Fashion Week banned fur in the same year.

Following its decision to ban fur in the Copenhagen Fashion Week from 2022, the event has received praise from Justice Emma Hakansson, Co-founder, Collective Fashion

With record export earnings of $42.61 billion in the fiscal year 2021-22, Bangladesh Garment Manufacturers and Exporters Association (BGMEA), has set a target to earn $100 billion by 2030 from the clothing products. In attaining the target of $100 billion export target, the sector has to earn $7.17 billion each year. Against 35.47 per cent growth in FY22, the sector also has to post an 11.26% annual growth in export earnings till 2030. The ambitious target was set at a time when the global economies are bleeding due to the Covid-19 pandemic impacts and ongoing Russia-Ukraine war.

On the other hand, the LDC graduation in 2026 will be another challenge for the exporters. This is because of possible duty free benefits withdrawal by the importing countries in the post-graduation period. Several researches showed, Bangladesh will have to range from 9%-12% duty after Bangladesh’s graduation to a developing country.

In FY22, export earnings from apparel products rose sharply by 35.47 per cent to $42.61 billion, which was $31.45 billion in the previous year. The sector contributed 81.81 per cent to the national exports. Of the $42.61 billion, knitwear products fetched $23.21 billion, up by 36.88 per cent from last fiscal year’s $19.91 billion, while woven items earned $19.39 billion, registering a 33.82 per cent growth. Knitwear products contributed much better than woven products.

Knitwear products contributed 44.56 per cent, while woven products 37.23 per cent. For sustaining the growth and to earn the $100 billion from the sector, there is a strong need to bring balance between woven and knitwear products. Knitwear products did well as the sector has a strong backward linkage and it can meet 85% to 90% demands of raw materials from domestic sources.

On the other hand, the woven sector can meet around 50 per cent raw materials from domestic sources, which is a barrier to growth. To reduce the gap between the woven and knitwear sector, the industry people have to come up with new investments to improve capacity to supply raw materials from local factories.

With 103 stores in India and more than 1,600 across the globe, Decathlon, a French sporting goods retailer, is committed to RE 100 by 2026. The brand is engaging with its suppliers to move to renewable forms of energy. All its key suppliers in India are working on reducing their emissions from energy with actions such as onsite energy, PPA (Power Purchase Agreement) or moving to biomass.

The brand is striving to reach -53 per cent carbon intensity target by 2026 to move towards a ‘low carbon +1.5°C’ world,

In 2022, over 1,300 of Decathlon’s products will be eco-design of which over 500 are made in India. Eco-design is an approach that aims to reduce the environmental impact of a product over its entire life cycle while preserving its qualities of use. This is achieved by integrating the product’s environmental impact into its design from the very beginning, taking into account the product’s entire life cycle. The company is committed to transform all its products into eco-design by 2026.

In Q1 FY’23, Bhandari Hosiery Exports posted net loss of Rs. 1.3593 crore as against net profit of Rs. 1.9546 crore for the period ended March 31, 2022.

The company’s income declined by 50.61 per cent to Rs. 46.4127 crore during the period ended June 30, 2022 as compared to Rs. 93.9679 crore during the period ended March 31, 2022.

The company’s EPS declined by 30.77 per cent to Rs. 0.09 for the period ended June 30, 2022 as compared to Rs. 0.13 for the period ended March 31, 2022.

On a year-on-year basis, Bhandari Hosiery Exports posted net profit of Rs.1.3593 crore for the period ended June 30, 2022 as against net profit) of Rs.1.0720 crore for the period ended June 30, 2021.

The company’s total income grew by 7.75 per cent to.Rs 46.4127 crore during the period ended June 30, 2022 as compared to Rs.43.0732 crore during the period ended June 30, 2021.

The company has reported EPS of Rs.0.09 for the period ended June 30, 2022 as compared to Rs.0.07 for the period ended June 30, 2021.

Apparel industry associations, stakeholders from across the world are joining hands to standby Sri Lanka’s apparel industry current facing a tough time due to the ongoing economic crisis which has affected its global competitiveness. Many associations from across the world have come out in support prominent among is the American Apparel and Footwear Association (AAFA) that has expressed strong support through a recent letter sent on behalf of buyers to Sri Lanka’s Joint Apparel Association Forum (JAAF). And as Sri Lanka struggles under the weight of the ongoing economic crisis with power outages, shortages and price increases of essentials, the JAAF has welcomed the call to action by the Ethical Trading Initiative (ETI) and the AAFA to support the apparel sector’s efforts towards ensuring worker welfare.

No changes required in current sourcing patterns

Steve Lamar, President and CEO, AAFA wrote in appreciation of JAAF’s efforts in keeping workers employed and safe during the crisis. It applauds the continuous work being done to ensure the industry’s progress and its ability to create new jobs. Lamar also warns, making significant changes in sourcing at this moment would impact both the country’s garment industry and workers engaged in it. AAFA reiterates its commitment to remain mindful of the current situation and consider the impact on workers before making any sourcing decisions. AAFA also commits to remain in constant touch with its Sri Lankan partners, ensuring timely payments to suppliers and guaranteeing a fair treatment to workers, says Lamar.

ETI meanwhile has commenced a collective response by engaging with economists, industry associations, worker representatives, and member companies operating in Sri Lanka to better understand the implications of the ongoing crisis on workers, suppliers and the industry at large. Distribution of dry rations, medicines, groceries and cooked food has been taken up as an initial step in support.

Supporting Sri Lanka with new initiatives

A supplier to global apparel brands and retailers, the Sri Lankan apparel industry needs to be supported during such tough times. Workers and their families need to be safeguarded and economy set in motion, opines Peter McAllister, Executive Director, ETI that has signed a joint call to action in collaboration with the Fair Wear Foundation, Fair Labor Association and British Retail Consortium.

The joint call for action encourages companies sourcing from Sri Lanka to support workers, suppliers and the sector at large. It encourages companies sourcing from Sri Lanka to introduce new initiatives to assess risks to workers, maintain regular communication with suppliers and make regular payments to suppliers. JAAF has welcomed this collective support as it enhances and compliments worker welfare measures already taken by the industry. Secretary General of JAAF Yohan Lawrence adds, “Factories are encouraged to implement welfare measures to best suit the requirements of their workers. As of June 2022, around 80 per cent apparel manufacturers have made cost of living adjustments to salaries over and above the annual increments. In some instances, these represent increases of 25 per cent from 2021.”

No order cancellation and timely payments

AADA’s letter also urges companies to avoid cancelling orders, ensure continued business to suppliers, pay all pending dues to workers and employees; review negotiated prices and include increase in energy, raw material and labor costs in future price negotiations. One of the most important recommendations of the letter includes exploring innovative remedial solutions to support workers and respecting human rights in these times of economic crisis.

Garment exporters in Cambodia are experiencing a major downturn with Western buyers either reducing or revising orders. Ken Loo, Secretary General, Garment Manufacturers’ Association of Cambodia (GMAC) notes, an unstable global environment and possibility of an economic recession in the West have sparked the decline in export orders.

As per the Phnom Penh Post report, labor costs of garment exporters in Cambodia have surged on account of a new pension scheme being launched for private sector workers from October 1 and sectoral minimum wages will be effective from January 1.

Rising logistics and compliance costs add to woes

This double whammy is being further aggravated by other issues like rising logistics and compliance cost, adds Loo. While exports are growing, the net income of exporters have not grown as much due to rise in other costs. Exporters’ profit margins continue to remain low as seen from the ratio of value added products to labor-related costs, adds Loo. Only 39 per cent companies made profits last year while 43 per cent reported a loss, points out Loo citing a study by the Japan External Trade Organization (JETRO).

Accelerate policies to restrict downturn

To overcome losses, Cambodian garment companies would need to adopt cost-effective measures, opines Loo. He recommends, Cambodia should accelerate the Garment, Footwear and Travel Goods Sector Development Strategy 2022-2027 to help cushion coming downturn. Penn Sovicheat, Spokesman, Ministry of Commerce upholds GMAC’s concerns over the Ukraine conflict and other issues affecting Western countries. These can indeed hamper export orders for Cambodian textile-related products, he adds.

Introduce new FTAs and trade strategies

He urges exporters to opt for nearshoring besides signing free trade agreements with new countries as COVID, the Ukraine crisis and soaring shipping costs threaten to derail trade with more distant markets.

Public and private stakeholders also need to explore new markets and devise new trade strategies, says Hong Vanak, Researcher, Royal Academy of Cambodia.

Besides, stakeholders need to reflect on the investments of Western countries on transportation and encourage manufacturers to step these up, Vanak opines. Cambodia’s garments, footwear and travel goods exports grew 40 per cent to $6.6 billion in the first half of this year compared to $4.72 billion reported in the same period last year, shows data from the General Department of Customs and Excise.

Textile industry players in India have expressed concern over the fluctuations in cotton prices on the Multi Commodity Exchange of India (MCX). In particular, they are worried about the huge difference in cotton prices in the months of August, October, November and December futures, especially the huge premium being demanded for near-term contract. Cotton prices in August are ruling at Rs 48,000 a bale or Rs 1.01 lakh per candy of 356 kg. Prices in October 2021 hovered at Rs 39,250 a bale while those in November declined to Rs 34,300 and to Rs 32,600 in December.

Cotton prices and stocks decline

Cotton prices declined Rs 35,000 from August to October last year and by Rs 30,000 from August to November and Rs 32,000 from August to December futures. Also, open interest in MCX is only 30,000 bales for the August contract with stocks in the exchange’s godown only 3,000 bales, says Atul Ganatra, President, Cotton Association of India (CAI). Prices on the Intercontinental Exchange (ICE), New York hovered at 103.99 US cents a pound in October and at 98.51 cents in December.

Indian cotton being sold at premium

ICE benchmark futures in July and MCX cotton August futures figures reveal, Indian cotton prices are commanding a 60 per cent premium while international yarn buyers are quoting ICE July rates for importing from India, Ganatra rues. Indian cotton is currently being sold at a premium to New York ICE cotton while in the past 10 years, it was sold at a discount, notes Ganatra.

Such artificially inflated cotton prices in India are damaging export competitiveness across all products, says Prabhu Dhamodharan, Convenor, Coimbatore-based Indian Texpreneurs Federation (ITF). Ganatra says, textile industry and spinning mills are compelled to buy cotton based on MCX rates but sell yarn in export market based on ICE futures. This is leading to huge losses.

Prices being driven by speculation

Ganatra explains, the belief that Indian cotton prices are fluctuating on account of loss of the US crop in Texas and China, is completely wrong as prices in India are being driven by pure speculation. Indian cottons premium prices is impacting exports of cotton, cotton yarn, apparel and garments. Cotton and cotton yarn exports dropped in July by 70 per cent due to high cotton prices, he adds.

Recession reduces demand

Dhamodharan attributes the reduced demand for cotton to a recessionary trend with low consumer sentiment. According to him, growth in the Indian textile sector can be boosted by the expectation of robust crop of good quality and removal of import duty on cotton. The Centre raised MSP for cotton to Rs 6,080 from Rs 5,726 a quintal for the medium staple variety. For the current crop year spanning from July 2022-June 2023, the net weighted modal price for cotton across various agricultural produce marketing committee (APMC) yards is Rs 10,621 a quintal.

Rise in prices stalls exportsv The Cotton Committee on Production and Consumption estimates, cotton production this year will total 340.62 lakh bales. However, the CAI pegs India’s cotton production at 315.32 lakh bales. A major reason for India’s cotton prices exceeding Rs 1 lakh a candy in May and June is the unseasonal rains that damaged crop quality. Good quality cotton had commanded a premium throughout the season, with domestic prices ruling at a premium to ICE benchmark futures.

However, rise in domestic prices has brought cotton exports to a halt. Till now, India has exported 40 lakh bales and does not expect to export any more until the season-end in September. Last season, it had exported 77.59 lakh bales.