Textile orders expected to rise from fourth quarter of 2023

	Textiles and garments face "double" difficulties: Lack of orders, unit prices are deeply reduced
	Textile and garment exports will reach US $ fourty one billion
	Dealing with outputs for the furniture, textile and footwear industries

Vietnamese textile and garment enterprises introduce raw materials at a textile and garment exhibition. Photo: N.H

In July 2023, Vietnam's textile and garment export turnover reached US$3.8 billion, down 9% year-on-year, lower than the 17% decrease in the first half of 2023. This is also the month recording the highest export value since the beginning of the year.

Export turnover of the industry in the first seven months of 2023 reached US$22.8 billion, down 15% year-on-year. Of which, export turnover to the US - the largest export market contributed 39% of total exports, reaching US$8.7 billion, down 24%. The exports to Europe and Japan reached US$2.7 billion, and US$2.2 billion respectively, down 10% and up 4%.

Thus, the Vietnam National Textile and Garment Group (Vinatex) expects the country's textile and garment export turnover in 2023 to reach about US$40 billion, down 10% compared to 2022.

In the textile and garment industry update just released on August 24, SSI Research pointed out that, due to the global economic downturn, inflationary pressure and high inventory levels in the first half of 2022, major textile and garment exporters also recorded a year-on-year decrease in exports in the first half of 2023. Specifically, China recorded a decrease of 7.3%. Bangladesh is the only country to record a 4% increase in the first half of 2023.

According to a survey of major retailers, although Vietnam is rated higher than Bangladesh in terms of quality and production capacity, Bangladesh has advantages in cost, tax and government subsidies. Bangladesh is among the 45 developing countries that are currently exempt from European tariffs. Meanwhile, the implementation of EVFTA, strict rules of origin for fabrics are an obstacle for Vietnam's textile and garment when about 70% of fabrics are imported from China.

In times of economic downturn, cost is one of the most important factors in choosing a manufacturer. The minimum wage in Bangladesh is currently US$75 /month, while the minimum wage in Vietnam and China is US$199/month and US$300/month, respectively. SSI Research also notes that in 2022, the USD/BDT rate decreased by 17%, while the USD/VND rate decreased by 3.5%. Accordingly, exports of Bangladesh become more competitive than that of Vietnam.

However, Vietnam continues to be ranked higher in product quality, labor productivity and delivery time, which are important factors for retailers as the economy recovers and demand increases.

In the second quarter of 2023, most of the listed textile and garment companies recorded a significant decrease in net revenue and net profit, with profit margin more narrowed than the previous year. TNG Investment and Trading Joint Stock Company and Thanh Cong Textile - Investment - Trade Joint Stock Company (TCM) recorded a decrease in net profit of 37% and 96% respectively over the same period in 2022. Song Hong Garment is more positive with a 2% slight decrease in net profit.

Song Hong Garment has the highest FOB orders in the apparel industry, helping the company receive great benefit from the industry's recovery while its major long-time customers such as Walmart, Columbia and Target have recorded revenue growth in recent quarters.

While orders are expected to recover in the fourth quarter of 2023, Vinatex thinks the recovery will be slow as spending on non-essential items takes time to recover. Therefore, SSI Research estimates that the average selling price will continue to remain low (about 20% lower than the average in the first half of 2022) and only slightly increase compared to the same period last year for FOB orders. Profit margin of manufacturing enterprises will continue to narrow although input material costs are gradually improving; gross profit margin will hardly return to its peak in 2019.

Vietnam's textile and garment: go faster or be usurped

Moreover, Vinatex expects the trend of orders with smaller volumes and faster delivery to last until 2024. In the second half of 2023, domestic garment manufacturers expect that the orders in the third quarter of 2023 will still be equivalent to the level of the second quarter of 2023. Following a sharp holiday sale in the fourth quarter of 2023, the revenue outlook should improve. According to the statistics in the past, when the amount of clothing inventory in the US peaked in January 2007, it took the market two years to absorb with the inventory to recover in December 2009.