Apparel retailers including H&M and Levi Strauss are at risk of facing heightened supply chain disruptions, as regions of Southern Asia are bracing for intense lockdowns as Covid-19 cases spike, fueled by the more contagious delta variant, according to a new report.
A new wave of Covid cases, especially along the Indian border, has prompted the government of Bangladesh to require its population of nearly 170 million people to remain at home for seven days, beginning this Thursday. The result will likely mean factories across the region will be forced to shut down, halting manufacturing. It marks Bangladesh’s most severe lockdown to date, with people only allowed to leave their homes for emergencies.
A new analysis from Panjiva, a business line of S&P Global Market Intelligence, points out that this marks a stark reversal from a trend spotted earlier on in the pandemic. Then, Bangladeshi apparel manufacturers suffered from orders being canceled by retailers in Europe and the Americas, where Covid restrictions were much tighter.
Still, Panjiva’s data show Bangladeshi exporters of apparel to the United States have been more resilient than nearby regions during the pandemic. Shipments in the three months ended April 30 are down by just 1.6%, compared with the same period of 2019, the firm said. Exporters from India and Sri Lanka, in contrast, dropped 10.1% and 6.4%, respectively.
Among the major retail brands with a presence in Bangladesh, shipments linked to H&M increased 13.5% in the three-months ended May 31, compared with the same period of 2019, Panjiva found. While imports associated with Levi’s fell 47.8%, and those with Calvin Klein-owner PVH dropped 68.7%.
Representatives from H&M, Levi’s and PVH didn’t immediately respond to CNBC’s requests for comment.
According to a September analysis of U.S. International Trade Commission data by the Peterson Institute for International Economics, Bangladesh has been gaining market share as China has become less competitive in labor-intensive sectors including apparel.
The additional supply chain disruptions will be hitting retail companies at a time when resources are already strained due to a number of factors. A shortage of shipping containers and a dearth of truck drivers have left inventory backlogged for weeks. This is typically a time when retailers are placing orders for the holiday season to ensure shelves are stocked during peak winter shopping.
The risk companies face is running into out-of-stocks, leaving customers to look elsewhere.
Brooks Running Company CEO Jim Weber told CNBC’s “Squawk Box” on Tuesday that his company is running on a roughly 80-day cycle for shipping, compared with what used to take just 40 days.
“There’s no question the supply chain is strung out in our industry,” he said.
Source: Business - cnbc.com
