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Credit Suisse has maintained an outperform rating on Arvind, with a target price of Rs 450. It sees the disruption from GST as temporary and short term.
The research firm says the GST outcome is good with five per cent tax on apparels costing less than Rs 1000 and 12 per cent on others. Its average ticket size of about Rs 700 to Rs 800 would attract five per cent, lower than the current 10 to 10.5 per cent of indirect taxes.
The branded business would likely see 150 to 200 basis point additional taxes, which is small enough to be passed on to consumers.
Credit Suisse feels the company’s first quarter FY18 and second quarter will be impacted, especially on margins, as there will be some transition pain. It says this impact will continue until the inventory gets cleared and this process could take three or four months. Given that margins are seasonally extremely low in the June quarter for brands and the retail business, the inventory impact could wipe out most of the margins for the quarter.
Due to destocking in channels, there would also be some revenue impact in the first quarter. The second quarter could witness restocking but the research house believes that the usual sales season was advanced to June this year.
The next edition of National Garment Fair will be held in Mumbai from July 10 to 12. The three day fair being organized by the Clothing Manufacturers Association of India (CMAI), will have 881 stalls displaying around 1,005 brands from 822 exhibitors. This will be India’s largest ever garment fair held so far. About 50,000 retailers from all over India are expected to visit the fair.
Over one lakh invitation cards displaying participating brands in men’s wear, women’s wear, children’s wear and accessories have been sent to retailers, wholesalers, agents and distributors inviting them to visit the fair. Business networking sessions will continue this year like before. There will be three sessions comprising agents and distributors, high street retailers, national chain stores and e-commerce companies.
Meanwhile, CMAI, in association with Tata Consultancy Services and Shah Chambers, has developed a software, Adhigam, for textile and garment manufacturers, traders and retailers, to prepare them for GST compliance. The software automatically converts regular invoices to GST-compliant invoices, sends reminders to vendors or suppliers who have not paid tax at any stage in the textile value chain. A manufacturer knows which vendor in the value chain has not paid tax and hence he can guide the vendor to pay the tax.
"Euratex, the European Apparel and Textile Confederation, recently said uncontrolled separation of the UK from the EU would have a very serious impact on industries on both sides, i.e. given comparably high import tariffs that would apply in the textiles and clothing sector. As per the Confederation, it is in common interest of the UK and EU27 industries to plead in favour of a smart and smooth Brexit, enabling current highly integrated supply chains to keep on working smoothly from fibres to end products."
Euratex, the European Apparel and Textile Confederation, recently said uncontrolled separation of the UK from the EU would have a very serious impact on industries on both sides, i.e. given comparably high import tariffs that would apply in the textiles and clothing sector. As per the Confederation, it is in common interest of the UK and EU27 industries to plead in favour of a smart and smooth Brexit, enabling current highly integrated supply chains to keep on working smoothly from fibres to end products.
A transitional arrangement should cover suspension of customs duties and all legal and regulatory areas with relevance for textiles and clothing industry. It should also directly lead to a comprehensive trade and investment agreement in the long run. A future comprehensive EU27-UK trade and investment agreement should further consider the already existing close economic relationship between the European textile and clothing industries, reports Euratex.
Evolving trade dynamics
The EU28 textiles and clothing industry is one of the major industries in the EU. With 1.7 million workers, it generated a total turnover of €171 billion in 2016. European textiles and clothing companies are globally leading in technical textiles, sophisticated high-quality yarns and fibres, as well as high-end apparel goods. The UK ranks third in EU27s most important trade partners in textiles and clothing goods. On average, the UK imported products almost €10 billion worth from the EU 27, while its exports amounted to €6.2 billion in the same period (2014 - 6). The textiles and clothing industries of the EU27 and other European neighbouring countries on the one hand and the UK, on the other hand, are closely interlinked in terms of supply chains, foreign direct investments and exchange of workers.
Way forward Euratex suggests, legal uncertainty should be avoided for all economic participants by adopting a transitional arrangement that would be applied between the March 29, 2019, the first day of the exit from the EU and the date of the entry into force of the comprehensive and ambitious agreement between EU27 and UK. The latter should also take into consideration the existence of a customs union between the EU and Turkey, and future FTA between UK and Switzerland as the EU - Switzerland 1972 agreement will no longer apply to UK.
Secondly, clear transitional arrangements bridging the gap between completion of the UK exit process and entry into force of future EU-UK agreement should be put in place. These should maintain the suspension of customs duties, efficient customs procedures and mutual recognition of regulatory standards. The major threat currently is the imposition of high customs duties. Avoiding new tariffs between the EU and the UK is a key factor for a future EU-UK relationship. In the textiles and clothing sector, the level of customs duties is generally higher than in other industrial sectors. Today, for the third countries not benefiting from any FTA or GSP regime, the EU duties are 4-5 per cent for yarns, 8 per cent for fabrics and 12 per cent for clothing entering the EU market. If duties of that kind were introduced, even on a temporary basis, between the EU27 and the UK, it would have a negative impact on both industries.
Future trade and investment agreement between the UK and the EU 27 should bring opportunities for growth, investment and job creation on both sides of the Channel, Euratex reports. It should cover the confirmation of a zero-duty level, customs procedures, public procurement, IPR provisions, market surveillance against non-compliant products, recognition of the specific textiles and clothing regulation, sustainable development; ensuring the maintenance of a fair access to R&D programmes, and free movement of nationals.
Regulatory divergence is another risk that should be dealt with. The risk of a regulatory divergence such as in the field of chemical regulation and REACH, CO2 emissions, consumer protection rules and standards, state aid, access to public procurement, labour laws and IPR is real. Divergences in the regulatory legislation of the EU and UK would create NTBs and result in high additional costs for consumers. Euratex aims at having an on-going harmonisation of legislation between UK and the EU, the organisation reports.
Zimbabwe is finalising the new prices for different grades of cotton ahead of the beginning of the selling season. Over 60 per cent of the total output is expected to be Grade A, which is the supreme grade in cotton production. This year the country has had an excellent season and expects that to continue every year in all areas, with cotton included.
Cotton production had declined to about 35,000 tons by 2016, from an average of 84,000 tons in 2015 and 1,43,000 tons in 2014. Farmers abandoned cotton production over the past few seasons in frustration over perennial poor prices offered by merchants. The plan is to double the cotton hectarage.
Zimbabwe’s textile and clothing sub-sector consists of three components: production and ginning of cotton, transformation of lint into yarn and fabric, and the conversion of fabric and yarn into garments. Production of cotton had significantly declined in recent years owing to the high cost of production and unending fights over pricing between farmers and merchants.
Other problems plaguing the industry in Zimbabwe are poor performance, low productivity, out of date technology, and lack of investment and government support. An increasing number of textile mills in the country is closing down.
A study by Allied Market Research says, wearable technology market was valued at US$19.6 billion in 2015, growing at a compound annual growth rate of 16.2 per cent to reach US$57.7 billion by 2022. The forecast highlights the sector's potential to boost the overall fashion industry.
The topic will be examined at a seminar titled "Wearable Technologies for Future Fashion." Jointly organised by the HKTDC and the Hong Kong Research Institute of Textiles and Apparel, the session is part of a seminar series to be held at the 24th Hong Kong Fashion Week S/S, from July 10 to 13 at the Hong Kong Convention and Exhibition Centre.
Industry leaders will offer insights on upcoming trends in wearable technologies. Raymond Chu, Chairman of textile machinery agent Chemtax will speak on "Future Knitting with Wearable Technologies." Predictions of huge demand in the smart and wearable textile sector will lead to a 40 per cent annual growth, making it worth $2.5 billion by 2021. There will be bigger growth among sports fashion brands, says Chu
Going forward, sophisticated sensors, heating elements even battery chargers will be added to fabrics using high-tech knitting machines for sport, leisure, the military, hospitals and emergency services. Such devices will be able to measure a person's vital signs, such as heart rate, breathing, skin temperature - even perspiration levels, he added.
Stanley Kwok, Director of Senty, will discuss on the health concerns in wearable tech highlighting the importance of addressing concerns surrounding the use of wearable technologies.
Jason Ho, Vice-President of Intertek Testing Services Hong Kong, an assurance, testing, inspection and certification agency, will speak on "Total Quality Assured." The Fashion Week will feature some 1,100 international exhibitors from 19 countries, including newcomers from Canada, Nepal, Saudi Arabia and Vietnam. Nepal and Italy will stage group pavilions for the first time, joining India, Indonesia, Japan, South Korea, Macau and Thailand. Other highlights at Fashion Week will include a series of international fashion parades, such as one featuring designs from Saudi Arabia, which is among countries covered by China's Belt and Road Initiative.
The wearable technology market will grow at a compound annual growth rate of 16.2 per cent by 2022. Growth of wearable technologies is revolutionising the way people connect through smart devices, which will also greatly impact the fashion industry. Going forward, sophisticated sensors, heating elements – even battery chargers – will be added to fabrics using high-tech knitting machines for sport, leisure, the military, hospitals and emergency services. Such devices will be able to measure a person’s vital signs, such as heart rate, breathing, skin temperature – even perspiration levels.
Sensors used in wearable devices could have health benefits, such as rehabilitation for patients with physical impairments and functional disabilities, and injury prevention for people at risk.
Advances in technology, including muscle and motion sensors, mean that wearable devices will be able to provide increasingly useful data to accurately estimate a person’s biomechanics. The knowledge gained can be used to launch tailor-made training or prevention.
All wearable technologies have to be carefully tested to ensure they meet strict manufacturing requirements. Most wearable technological devices worn close to the body transmit data to smart phones. The quality of smart clothing must meet both the necessary electronic and high-performance textile requirements. Such devices are specially developed and tested so they are made to the highest standards, with advanced performance features, and are safe to use.
The upholstery sector in Pakistan is in dire need of dedicated industrial zones across the country. Establishment of cottage industrial zones could help promote the handloom, carpet, hosiery and embroidery sectors. With these measures, exports by these sectors could be enhanced by $3.5 billion annually in the next five years.
Upholstery manufacturers are unable to meet the demands of buyers. One reason is an increase in cost of production. There has been a 39 per cent increase in gas and other tariffs. Japan, China and many other countries have established cottage industries to provide a strong base for industrial development with great success. The speedy development of these countries was only due to industrialisation and encouragement to entrepreneurs.
The All-Pakistan Bedsheets and Upholstery Manufacturers Association has expressed concern over the proposed increase in sales tax on exports from two to five per cent, saying the increase in the rate of sales tax will affect the country’s fragile exports adversely and leave a negative impact on the value-added sector. It says keeping in mind the difficulties of exporting units, especially the value added sector, the increased sales tax rate on exports should be withdrawn and the no payment no refund system should be introduced.
The UK will continue to provide zero-duty benefit on import of goods from Bangladesh and 47 other least developed countries even after Brexit. Bangladesh’s exports, especially garment items, to the UK began to slide after the Brexit vote. Garments, which account for more than 80 per cent of Bangladesh’s total exports to the UK, fell by nearly six per cent with export earnings falling in the last 11 months of the outgoing fiscal year.
Year-on-year growth of Bangladesh’s garment exports to the UK has hovered around 15 per cent over the last few years. However, it is likely to see negative growth in fiscal 2016-17. The UK is a major export destination, as Bangladesh has been enjoying duty privilege under the EU's Everything But Arms scheme and also because a large number of non-resident Bangladeshis live in the UK.
In the last 11 months of the outgoing fiscal year, Bangladesh exported goods worth 3.26 billion dollars to the UK compared to 3.44 billion dollars in the corresponding period of the previous fiscal year. Bangladesh is watching if Britain and the EU sign any bilateral free trade agreements with countries competing with Bangladesh. If the UK and the EU give the same benefit to those countries, Bangladesh would face tough competition.
Morocco Style will be held from March 28 to 31, 2018. This is a textile and accessories fair. The event will connect textile professionals. The previous edition of Morocco Style saw a successful turnout of over 12,000 visitors and 300 exhibitors.
Exhibits will include textiles, leather clothing, nightwear, shoes, bags, cosmetics, yarn, wool, knitted fabric, women’s and men’s clothing, denim, lingerie, sportswear, children’s clothing, accessories and more. Visitors will include designers, stylists, wholesalers, department stores, shop owners, agents and distributors and associations.
The fair points to the new season’s textile trends and is a key hub of North Africa’s textile market. Morocco has become an important supplier of ready-to-wear via free trade agreements with the EU and the US. A huge proportion of the sector is small and medium sized enterprises, which makes Morocco a very flexible environment for placing orders according to fashion and trade preferences.
Professional buyers will have a chance to attend B2B meetings with exhibitors and sectoral associations. Morocco Style has buyer delegation programs by focusing on eight target countries--Morocco, Algeria, Libya, Egypt, France, Portugal, Spain, Italy. Moroccan fabric imports are exempt from tax. This accelerates the export of ready-to-wear. Casablanca, the biggest city and the port of Morocco, holds 80 per cent of Morocco’s trade volume.
Indian textile exports are expected to grow by 18 per cent in financial year ’18. The US has already exited the Trans-Pacific Partnership, which is expected to realign the textile trade and move the global market towards the Indian subcontinent. Earlier the trade was diverted to Thailand and Vietnam.
Synthetic textile is expected to grow more following a fiber-neutral tariff policy. High polyester products which have a 15 per cent share in global trade are likely to grow in the context of India. Small players such as Bangladesh and Vietnam who enjoy the benefits imposed on India by US and European markets are likely to lag in exports. China’s focus on a shift to the technology sector was another reason that led to a decline in its share in global trade and an increase in the trade volumes of smaller countries.
The Indian export industry already enjoys significant advantages because of the government’s support to exports and declining interest rates. However, cascading taxes and a fragmented industry structure are the bugbears the industry currently faces before the implementation of GST. India’s textile sector contributes about 11 per cent to the country’s total exports.
