Rising Labor Costs: Challenges Facing The Textile And Garment Industry
Recently, the rising cost of labor has become a common concern of the society.
Raising the minimum wage and raising the remuneration of the low income class bring certain cost pressure to the enterprises.
Textile and garment industry, as a traditional labor-intensive and low margin industry, will inevitably be affected in this round of pay rise.
In this report, we analyzed the rise in labor costs to textiles.
Clothing company
The impact of operating performance is forecasted, and the calculation of the degree of net profit decline of enterprises under different salary increases is forecasted for investors to refer to.
The calculation of static sensitivity showed that the average wage increased by 10% and the net profit decreased by 5%, including sports brand trends, Anta, Lining, men's brand Li Lang and so on. The net profit dropped from 5% to 10%, including home textile brand Luo Lai, Fuan (002327, stock bar), footwear brand BELLE, Daphne, garment manufacturing enterprise Shenzhou International, and the net profit decreased by more than 10%: processing manufacturing enterprise Yuyuan, Wei Qiao textile, and smaller brand operators Saturday (002291, shares bar) and so on.
Overall, upstream producers and distributors are more affected by brand labor than the brand operators.
For brand operators, the scale of sales has increased significantly.
Management
Leverage effect, to a certain extent, can resist the negative impact of wage increases.
The expansion of brand sales does not necessarily require the expansion of management teams in proportion. R & D, marketing and other departments can play a strong leverage role.
Therefore, under the similar operation mode, the large scale and fast growing brand operation enterprises are less affected by the change of salary.
We believe that the net profit margin is low.
enterprise
The impact of rising wages is relatively large.
Research shows that many textile and garment enterprises with low profit margins and high labor costs have fallen more than 20% when wages have risen more than 20%.
Investment suggestion
Production and distribution enterprises have greater risks and avoid low profit and high labor costs, such as Yuyuan, Wei Qiao textile, Germany Yongjia, Baosheng and so on.
It is recommended to pay attention to brand operation companies, and recommend: Men's clothing (Li Lang, seven wolves (002029, stock bar)), sportswear (Lining, Anta, China trend), women's shoes (BELLE), etc.
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