Details as follows:
GENERAL NEWS
CLIA reviews 2011
The Chinese Leather Association recently published a
review of The National Development and Reform Commission updated "the
Industrial Structure Adjustment Guidelines" to encourage leather industry
sustainable to growth in 2011
The 10 points were:
1.
To accelerate the change of
economy growth mode and industrial adjustment and optimization and upgrading
industry, and to establish a modern industrial system the National Development
and Reform Commission revised "Industrial Structure Adjustment
Guidelines" (version 2011) on March 27, 2011, taking effect on July 1.
2. Compared with previous version, in the new guidelines
the items for leather sector to be encouraged to develop are the cleaner
production of leather and fur, technologies and equipment in finishing
processing, exhausted chrome recycling, utilization of sludge content trivalent
chromium, new chemical agents employing in leather making, in the limited items
the guidelines raise threshold to 200,000 pieces of leather in annual
production capacity from 100,000 pieces of leather per year, in the newly
adding item the production below 100,000 wet blue leather is limited, in the
eliminated items the threshold raises to 50,000 pieces of cow leather in annual
production capacity from 30,000 pieces of leather in previous version, the
production of wet blue leather with less 30,000 pieces are listed in the
eliminated items.
3. The Ministry of Environmental Protection firstly
revealed the qualified list of tanneries
To strengthen the environmental awareness and update the technologies in
tanning sectors the ministry of environmental protection launched an overall
environmental inspection on leather making industry in early 2011, and
announced the first list of tanneries in line with environmental regulations in
May 19, the second qualified list of tanneries was posted on August 29.
4. The guidelines on leather industry's five-year plan
officially published.
The industry five-year plan issued by CLIA on the first session of seventh
council congress caused huge echoed in the industry. The document is considered
to be the crystallization of the industrial wisdom and achievements and a
guideline to lead industry to develop for next five years. The guidelines aim
at improving quality and efficiency in the industry with changing of growth
pattern, laying a solid foundation to turn China into powerful leather country
from large one.
5. The EU ended the anti-dumping duty on Chinese leather
shoes as WTO final ruling. The EU Committee announced to end the anti-dumping
duty imposed on leather shoes that are imported from China and Vietnam and take
effect on March 31, 2011, but the supervision system was followed for one year
long on above products. According to WTO expert panel report released on
October 28 EU anti-dumping duty on Chinese shoes violates the WTO rules during
EU anti-dumping investigation and its reviewing investigation.
6. CLIA selected new board members of the seventh council.
In accordance with election regulations on the industrial associations setting
by the State-owned Assets Supervision and Administration Commission of the
State Council and rules of China Leather Industry Association, the seventh
council members were selected by vote on the annual general meeting that held
in Shanghai on September 5, 2011. 64 companies were elected as new council
president and vice presidents, 277 companies took the position of standing
director unit, 442 held unit of director of association. Mr. Su Chaoying was
appointed as new president; the vice president was taken by Mr. Li Yuzhong who
also took the position of general secretary. Chinese expert firstly acting as
convenor in international organization for standardization of footwear.
7. ISO/TC 216/WG1 called the first working group meeting
in Brussels from March 2 to 3, 2011 and announced the establishment of WG1 with
composition of 15 industrial experts, Chinese footwear expert Zhang Weijuan in
China Leather and Footwear Research Institutes was acting as convenor in the
organization. The second meeting focused on topic of footwear and
micro-organism, which held on October 25, 2011, with conclusion to support the
researches on: ISO/NP 16718 and ISO/NP 16719 that were proposed by China
8. China's first leather chemicals production base built
in Deyang city. Leather chemical production Deyang city in Sichan province
becomes well known due to the honor of China Leather Chemicals Production Base
conferred by China National Council of Light Industry and China Leather
Industry Association on September 5, 2011. Sichuan is the province taking an
important role on national leather chemicals production, most of these
production focuses on Deyang city, which accounting for 60%or70% of
the provincial production. The leather chemicals sector in the city is stressed
on the city's five years plan and to be considered as a key sector to support.
9. The leather research wins second award of national
technical invention.The key technology to make environmental friendly
chemicals used for tanning and finishing process has won the second award of
national technical invention on January 14, 2011, which is achieved by the
research group headed by professor Ma Jianzhong, vie president of Shanxi
University of Science And Technology. The new method to make the chemicals
could effectively reduce pollution from leather processing and enhance the
properties of leather. The technology has been employed by many tanneries and
achieved a good result on economy and social effects.
10. The CLIA posted foreign dishonest traders with black list within its
members. In recent two years the fluctuations of raw hides and skins were seen
in international market, some illegal and dishonest foreign traders took the
chance to sign the contracts with Chinese buyers with relatively low offering
price, and then delivered inferior quality of hides and skins. The buyers’
claim for compensation were always met the delaying or refusing. In order to
maintain the fair trade and protect the interests of CLIA members, CLIA put
these dishonest traders in black list and circulated in its members, so as to
prevent further losses with this warning.
11.
Shoes exports sets the lowest
level in growth rate. The growth rate in shoes exports dropped to 2.4% from
21.5% previous year during the first 11 months, setting lowest level in recent
years. Although it was favorable to Chinese shoes export that EU ended
anti-dumping on Chinese leather shoes on March, leather shoes export was
dropped by 9% in volume. Impacted by production costs hiking, revaluation of
RMB, Europe debt crises and so on Chinese shoes sector saw a weak growth in
export, transforming foreign trade growth mode has become most urgent need to
boost the export growth.
Vietnamese leather/footwear exports projected for 2012
Exports of leather products and footwear were expected
to reach US$8.5 billion next year, up nearly 9 per cent over 2011, according to
the Viet Nam Leather and Footwear Association (Lefaso), which predicted that
leather handbag exporters in particular would see growth of about 15 per cent.
Lefaso vice chairman Diep Thanh Kiet said that over
half of major leather and footwear firms had already landed export contracts
for the first quarter and 25 per cent of the firms had contracts for the second
quarter.
The US was forecast to be the largest import market
for Vietnamese handbags and footwear since the Trans-Pacific Partnership (TPP)
takes effect next year. Under the TPP agreement, Vietnamese products will enjoy
a tariff reduction to below the level imposed on similar Chinese products.
However, industry insiders were also concerned about a
reduction in exports to one of the industry's leading import markets, the EU,
due to the bloc's debt crisis. Exporters have already reported a decline of
roughly 20-30 per cent in export contracts to that market.
Moreover, the EU continues to supervise Vietnamese
footwear products due to anti-dumping litigation, which will cause Vietnamese
product to be less competitive than those of Indonesia, India, Bangladesh and
Sri Lanka, which will benefits from preferential tariffs.
On the domestic market, Lefaso forecast little
significant change next year as local consumer demand would remain at about 75
million pairs of shoes and 25 million handbags.
Brazilian cattle slaughter
Brazil recently product their
official cattle slaughter statistics for the third quarter of 2011. During the
three-month period, Brazilian abattoirs slaughtered almost 7.3 million head of
cattle, which represents an increase of 3.1% compared to the second quarter or
2011. Compared to the first quarter of 2010 this is down by 1.6%
Prime Asia press release
announces carbon footprint measurement
PrimeAsia Leather Company is
one of the first tanneries worldwide to extensively measure the individual
carbon footprint of their leather products against international standards. SGS
in collaboration with the Plastics Industry Development Center certified
PrimeAsia leather’s greenhouse gas emissions (GHG) according to ISO
14064-3:2006 as meeting the requirements of PAS 2050: 2008. PrimeAsia’s carbon
footprint program aims to provide additional knowledge to drive ahead the use
and further development of energy efficiency.
The carbon footprint project
involved mapping individual leather product’s lifecycles within the business,
analyzing the energy used in each stage of the leather making process, and then
equating the GHG from each stage to equivalent carbon dioxide emissions (CO2e).
The CO2e emissions of
PrimeAsia’s leather products will be used as a benchmark to analyze the impact
of present and future energy reduction programs. The carbon data will be made
available to customers to enable them to make informed decisions regarding the
environmental impact of different PrimeAsia leather products. In 2012,
PrimeAsia’s footprint program will continue by measuring water usage per unit
of leather and company human resource environmental impacts.
(Livestock Marketing
Association.com) - Brazilian-based JBS, the world’s largest meat packer and
producer of animal protein, plans to slash $500 million off the annual cost of
its global operations by streamlining operations and logistics, the company
said late last month.
JBS announces plans to cut
costs
The company aims to cut costs
through centralizing its purchases and through efficiency gains in logistics and
deeper integration of its operations. Savings in its Brazilian operations are
expected to reach $100 million, JBS said.
After a string of acquisitions over the
past half-decade that made the company the world's biggest meat producer, JBS
will take a breather from more acquisitions for now, Chief Executive Wesley
Batista said. In the U.S. market, where most of the company's revenues are
generated, Batista said it would be possible to economize $8 a head on the
cattle it bought that would yield annual savings of $50 million. He also saw
potential savings in its U.S. poultry company, Pilgrim's Pride, its Australian
operations and its logistics operations.
Indian Council for Leather
Exports shows concern for their markets
Even as the euro zone crisis
may result in decline in orders next year, Indian leather exporters are hoping
that the likely diversion of some exports from China to India will partly
compensate the drop in orders from Europe.
‘The European Union is the
traditional and largest market for Indian leather products. About 67% of our
leather exports are directed to EU. The present trend in Europe is definitely
slow and the economic crisis has affected the demand making importers very
cautious and conservative. There is a projected drop of 20-25% predicted by
buyers for the year 2012,’ Ali Ahmed Khan, executive director, Council for
Leather Exports (CLE) told the Indian Financial Chronicle.
Other potential markets that
are being tapped are the USA, Japan, Russia, Canada and Australia, among others.
However, we will be able to see the results only from the last quarter of 2012.
Again this will really not fully compensate the slowdown of the traditional
markets.
‘China is facing higher costs
and a shortage in labor. We expect that some of the orders from EU to China get
diverted to India and this would partly compensate the order drop estimates,’
he added. The global leather trade is estimated at US$116 billion and India’s
share is about $3.5 billion, a share of just 3% despite the availability of huge
manpower and the raw material base, the country has. However, China’s share in
global leather trade is 22% at $25 billion. Interestingly, 12-15 years ago,
both China and India were at the same level, doing about a billion dollars
worth of exports.
‘Besides expanding their
production capacity in a rapid way, Chinese leather manufacturers went ahead
and acquired companies and brands in markets such as US. This had given them
easy access to these markets and boost their exports in quick period,’ M Rafeeque
Ahmed, chairman, CLE said.
He said Indian companies are
now scouting for such opportunities in the US market, which accounts for about
9% of Indian leather exports. Indian leather firms would be looking at footwear
brands and distribution companies in the US.
In leather garments India and
China are strong competitors and India is the second largest producer of
leather garments, next only to China, which makes 70 million pieces of the
total global trade volume of about 120 million pieces. India’s annual garments
production capacity is about 16 million pieces.
The Leather Working Group announces
“gold status” to two tanneries
Solar,
wind and reed bed technology at Saigon TanTec
Following recent
environment audits, the Leather Working Group have awarded the highest 'gold'
status to two leading tanneries. They are Saigon TanTec, Saigon in Vietnam and
Tyson Food's wet-blue plant in Amarillo, Texas.
The
Saigon TanTec plant in Vietnam features solar panels, a wetland area to process
waste and wind power to provide energy for the tannery. The LWG have also
recently awarded silver status to Curtiembres Fonesca in Argentina and Tehchang
Leather Products in Taiwan.
The
objective of The Leather Working Group is to develop and maintain a protocol
that assesses the compliance and environmental performance of tanners and
promotes sustainable and appropriate environmental business practices within
the leather industry.
The group seeks to improve the tanning industry by creating alignment on
environmentalpriorities, bringing visibility to best practices and
providing suggested guidelines for continual improvement.
It is the
group's objective to work transparently, involving brands, suppliers,
retailers, leading technical experts within the leather industry, NGOs and other
stakeholder organisations.
Pakistani Nov. leather exports
This export-oriented
sector accounts for about four percent of total exports not only earning huge
amounts of foreign exchange, but also providing employment opportunities to
about 0.3 million people.
Going forward, the
widening of trade gap by more than $1.7 billion for 5MFY12 vis-à-vis 5MFY11
leaves no room for presumptuous export figures. Eyeing the trend, Chairman Pakistan
Tanner Association, S.M. Naseem, makes no mistake when he expects a massive
decline in the leather exports.
FY11 saw an increase in total leather and leather goods exports by more than 25
percent, as they were able to fetch better export prices. The largest
contributions were by leather gloves and leather garments.
Leather exports for 5MFY12 increased by almost 15 percent versus the same
period in FY11; However, a slowdown of 10 percent in leather exports is likely
for FY12.The early signs of this slowdown can be seen from the meager
month-on-month increase in exports of 0.44 percent in November.
He noted that a bleak outlook for the export market and especially the leather
sector would not have emerged if the country were not going through the toughest
energy crisis of all times. The severe power shortage and gas crisis have led
to the cancellation of massive orders by major leather importers.
He went on to say that a shutdown of factories is next in this chain of events.
To add to the upheaval, the Eurozone crisis pumped by the European countries
can wreak havoc to the trade balance for FY12.
Spain and Italy, who are amongst the major importers of finished leather,
leather garments and shoes, are at the verge of being pushed into sovereign
default. Not much can be promised as tumbling commodity prices, rising input
costs and softening of demand in China, another prime importer, strengthen the
fears. Not to forget the floods of 2011 that led to livestock losses.
TFL creditors shopping for bids
TFL Holding GmbH’s
creditors plan to begin seeking bids for the leather-chemicals supplier from
early next year, according to the trustee overseeing the sale. Creditors of the
company and adviser Leonardo & Co. will begin the auction in January,
according to lawyer Andreas Ziegenhagen.
Efforts to consolidate
among European suppliers of leather chemicals have been hampered by low
valuations. BASF SE (BAS) abandoned
the sale of its leather and textile unit in March after offers fell short of
the company’s valuation. Competition from low-cost producers in Asia is
coinciding with a slowdown in demand in some markets for leather bags and
shoes.
TFL has attracted interest
from financial sponsors and difficulty in raising debt may lead to bids of less
than 200 million euros ($260 million) if markets don’t improve, said a person
familiar with the transaction, who declined to be named because the information
isn’t public.
Leonardo already sent out
a memo detailing the forthcoming auction of TFL, which stands for Together For
Leather. The supplier of chemicals for car leather and handbags is being sold
on behalf of creditors seeking debt repayments taken on under the ownership of
private equity firm Odewald & Cie.
Other leather-chemical
makers in Europe
include Clariant AG (CLN), Lanxess AG (LXS) and Stahl, owned by French buyout firm Wendel SA. Lanxess, which
in July started work on a 30 million-euro leather chemicals plant in Changzhou,
China, is an unlikely buyer now as it already
has had ample opportunity to target TFL, two people said.
TFL, based in Weil am
Rhein, is suffering after Odewald saddled it with 65 million euros in debt,
leading the company to break covenants in 2008, two people familiar with the
matter said in September. Odewald bought TFL, which has annual sales of about
240 million euros, from Permira Advisers LLP in 2003 for an undisclosed price.
ECONOMIC NEWS
China’s factory activity down lower
China's factory activity
shrank again December as demand at home and abroad slackened, a purchasing
managers' survey showed on Friday, reinforcing the case for pro-growth policies
to underpin the world's second-largest economy.
The People's Bank of China is
widely expected to lower its requirement for the amount of cash banks must hold
as reserves to let lenders inject more credit into the economy to fight
headwinds from Europe's debt crisis and sluggish U.S. demand.
The HSBC Purchasing Manager's Index, designed to preview the state of Chinese
industry before official output data are published, inched up to 48.7 in
December from a 32-month low of 47.7 in November, but fell short of the flash
reading of 49.
The HSBC PMI has been mostly
under 50, which demarcates expansion from contraction, since July.
"While the pace of
slowdown is stabilizing somewhat, weakening external demand is starting to
bite," said Qu Hongbin, China
economist at HSBC.
"This, plus ongoing
property market corrections, adds to calls for more aggressive action on fiscal
and monetary fronts to stabilize growth and jobs, especially with prices easing
rapidly."
He said China would avoid a
hard economic landing so long as policy easing measures filtered through in
coming months.
HSBC believes a PMI reading
of as low as 48 in China still points to annual growth of 12-13
percent in industrial output.
China's once turbo-charged economy
is on track to slow for a fourth successive quarter, easing further from the
first quarter's 9.7 percent annual growth rate with economists expecting the
final three months of the year to have slipped below 9 percent.
Persistent capital outflows
from China are putting more pressure on the central bank to release cash to
keep credit conditions supportive for growth.
Underlying indexes of the
HSBC PMI showed softening demand at home and abroad, which helped cool
inflation -- a boon for Chinese policymakers, according to the data collated by
UK-based information firm, Markit.
The sub-index for overall new
orders edged up to 46.9 in December from November's 45, but still signaled
falling demand. New export orders shrank in a reflection of listless demand
from the United States and Europe -- China's top overseas markets.
Average input costs faced by
manufacturers continued to moderate as raw material prices slipped, the HSBC
survey showed. Inflation appears to be cooling, having fallen from a three-year
high of 6.5 percent in July to 4.2 percent in November, creating additional
room for policy easing to support growth.
HSBC's Qu expects the
government to move on the fiscal front to boost job creation, cutting taxes for
exporters -- a sector employing more than 30 million workers -- while
increasing spending on public housing and other projects.
"On top of monetary
easing, mainly in the form of further reserve ratio cuts, we have long argued
that fiscal policy can and should play a more important role in stabilize
growth and jobs," Qu said.
Retailers typically pleased with holiday sales
Retailers got a last minute holiday gift this year.
Late holiday shoppers — both in the week leading up to Christmas and on the day
after — boosted sales and made clear this year’s holiday season will likely
outpace the same period last year.
According to ShopperTrak — the world’s largest
provider of retail and mall foot-traffic counting services — consumers spent
approximately $44 billion in GAFO retail sales for the week ending Dec. 24, a
37.8 percent increase over the previous week and a 14.8 percent gain over the
same week last year. Foot traffic was also high, increasing 32.4 percent from
the previous week.
Last week’s sales increase ensured this December will
outpace December 2010. Month-to-date figures are up 4.7 percent over December
2010.
“Holiday shopping reached a climax last week,” said
ShopperTrak founder Bill Martin. “With good weather in most of the country and
the season coming to a close, procrastinators and bargain hunters hit the
stores and gave retailers the sales lift they needed to outpace last year.”
According to ShopperTrak, a late holiday shopping
surge is not uncommon. Last year, the 10 days before Christmas accounted for
24.4% of total GAFO retail sales in the entire holiday shopping season of
November and December.
“Increased foot-traffic does not always translate into
sales,” added Martin. “Retailers who monitored their foot-traffic hourly and
adjusted inventory and staffing to convert shoppers into buyers were the most
successful last week.”
As expected, shoppers came out in full force on the
day after Christmas because it fell on a Monday for the first time in six
years. The day ranked fourth in foot-traffic and sales for the entire holiday
season, behind Black Friday Nov. 26, Friday Dec. 23 and Super Saturday Dec.
17. Foot traffic increased 25.9% over the same day last year and consumers
spent $7.1 billion on Dec. 26 in GAFO retail sales, an increase of 25.5%
percent over the same day last year.
“Dec. 26 was likely the last door-buster day of the
season as shoppers returned unwanted gift items and shopped for marked-down
merchandise,” said Martin. “ShopperTrak expects a drop in sales this week as
the season ends. Retailers must continue to monitor same-store traffic to
capitalize on the final week of the holiday season.”
ShopperTrak analyzed foot-traffic from more than
25,000 locations in the United States to create this National Retail Sales
Estimate™ (NRSE) of general merchandise, apparel and accessories, furniture and
other sales. With more than 40,000 units installed in the world's best known
retail outlets and malls and more than 15 years of retail expertise,
ShopperTrak is the industry's authority for information and analysis of the
movement of shoppers in retail environments. Developed by ShopperTrak, the
National Retail Sales Estimate (NRSE) provides a nationwide benchmark of GAFO
retail sales.
NRSE is derived from the U.S. Commerce Department's
GAFO (general merchandise, apparel, furniture, sporting goods, electronics,
hobby, books and other related store sales) statistic, as well as ShopperTrak's
proprietary industry intelligence on shopper foot traffic and sales. NRSE
provides retailers, investors and policy makers the most accurate and timely
information on consumer sales trends available today.
Holiday season retail e-commerce spending for Nov. 1
through Dec. 26 reached $35.3 billion, up 15-percent versus the corresponding
days last year, according to comScore. The most recent week (ending Dec. 25)
witnessed $2.8 billion in spending, an increase of 16 percent versus the
corresponding week last year.
Weekly Online Holiday Retail Sales
The Conference Board on
Tuesday said its consumer-confidence index jumped to 64.5 in December - the
highest level in eight months - from a revised 55.2 in November. Economists
surveyed by MarketWatch were expecting the index to climb to 60.0. Consumer
confidence has jumped nearly 25 points in the past three months and now sits at
its highest level since April. "Consumers are more optimistic that
business conditions, employment prospects and their financial situations will
continue to get better," said Lynn Franco, director of the board's
consumer-research center. Yet Franco also cautioned against reading too much
into the data. "While consumers are ending the year in a somewhat more
upbeat mood, it's too soon to tell if this is a rebound from earlier declines
or a sustainable shift in attitudes." The present situation index rose to
46.7 from 38.3 and the future expectations index rose to 76.4 from 66.4, the
board said. The percentage of people who expect more jobs to be available in
coming months moved up to 13.3% from 12.4%.
Consumer sentiment up in December
A gauge of consumer
sentiment reached 69.9 in the final reading for December compared with 64.1 in
November, according to Thursday reports on the data from the University of
Michigan and Thomson Reuters. This is the fourth consecutive monthly gain in
the index. A preliminary reading for December pegged the gauge at 67.7.
Economists polled by MarketWatch had expected a final December result of 68.7,
with consumers somewhat cheered by declining retail gasoline prices and the
large drop in initial jobless claims. The sentiment gauge, which covers how
consumers view their personal finances as well as business and buying
conditions, averaged about 87 in the year before the start of the most recent
recession. Economists watch sentiment data to get a feel for the direction of
consumer spending
FOOTWEAR
Yue Yuen profits off
Yue Yuen Industrial (Holdings) Limited's revenues for
the year ended Sept. 30 rose 21.7 percent year $7.04 billion, while net profit
decreased by 6.2 percent year to approximately US$449.8 million. Basic earnings
per share at 27.28 cents, decreased by 6.2 percent compared to last year's
figure.
Sales to the Group's largest geographic market, Asia,
grew at moderate pace of 26.2 percent compared to last year. In its second
largest market, the U.S.A., sales rose 17.7 percent. The European market
managed to grow at 30.6 percent compared to last year. South America had sales
growth of 6.2 percent.
Total Turnover by Geographical Market
Sales of athletic shoes, the key product category for
the Group, grew by 20.1 percent year on year. The category with the strongest
sales momentum, casual outdoor shoes, grew by 31.4 percent year on year.
Leading brand name customers in both categories were able to launch a series of
new models with innovative designs to capture consumer attention and boost
sales. Retail sales were also up year on year as China had solid GDP growth and
consumers in China continued their purchases of well known brand name athletic
footwear and apparel.
Total Turnover by Product Category
At the end of September 2011, the total number of
directly operated counters/stores in China under the Group stood at about 3,055
and there were 3,357 sub-distributors in the Greater China region.
During the year under review, the Group increased the
number of production lines by 16.7 percent to 537. Most of these new lines were
allocated among its three key production bases: China, Indonesia and Vietnam.
The pairs of shoes made by the Group during the year amounted to 326.6 million,
an increase of 14.0 percent.
Looking Forward
For the two months ended November 2011, the Group
turnover stepped up by around 15 percent year-on-year to approximately $1.2
billion.
Indonesian footwear exports forecast to rise
Footwear exports from Indonesia are likely to surge by
25 percent year-on-year to US$ 3.1 billion in 2011, the Association of
Indonesian Footwear Producers (Asprindo) has said.
However, the figure is less than the earlier set target of US$ 3.2 billion.
Asprindo has revised the figure downwards due to the financial crisis in Europe,
which has led to a 10-20 percent drop in export orders.
The Association has set the target of US$ 3.4 billion for footwear exports in
2012, a rise of 10 percent over the current year.
During the current year, Indonesia’s domestic footwear sales are expected to
grow by ten percent to IDR 24 trillion (US$ 2.64 billion) from IDR 22 trillion
in 2010.
Vietnam forecast footwear exports to rise
Vietnam’s
footwear exports reached US$ 5.7 billion by November end this year and are
likely to reach US$ 6.2 billion by year-end, Vietnam Leather and Footwear
Association (Lefaso) has stated.
Vietnam’s US$ 5.11 billion worth of footwear exports till October this year are
reflective of a year-on-year rise of 25.8 percent. Also, with such impressive
export growth figures, footwear became the country’s third largest export
earning industry, next to garment and crude oil.
Such a rise in footwear exports is mainly attributable to abolishment of the
anti-dumping duties imposed on the Vietnamese leather shoes by the European
Commission.
However, with most EU nations facing financial crisis, a slump of almost 20 to
30 percent has been noted in volume of Vietnamese footwear exports to the EU in
November 2011.
Lefaso foresees the country’s footwear sector to grow
sluggishly during the next year as compared to the current year, and expects to
achieve a growth of only 12 percent during 2012.
The Finish Line posts better sales
The Finish Line, Inc. reported revenues rose 8.1
percent in the quarter ended Nov.26, to $282.0 million from $260.9 million a
year ago. Comparable store sales increased 7.7 percent on top of an increase of
10.1 percent for the same period a year ago.
Digital sales, which are included in the comparable
store sales results, were up 60.8 percent in the third quarter. Earnings rose
34.1 percent to $5.5 million, from $4.1 million, year ago.
Operating margin increased 20 basis points to 2.7
percent of sales this year from 2.5 percent of sales one year ago.
Consolidated merchandise inventories increased 7.0
percent to $280.4 million at the end of the quarter compared to $262.2 million
a year ago. For Finish Line, merchandise inventories increased by 5.5 percent.
For the 39 weeks ended Nov. 26, 2011, consolidated net
sales increased 8.1 percent to $913.0 million compared to $844.4 million for
the same period a year ago. Finish Line year-to-date comparable store sales
increased 8.5 percent on top of a 7.3 percent increase last year. Digital
sales, on a year-to-date basis, were up 58.7 percent over the prior year.
The company reported consolidated net income of $42.9
million, which is a 27.0 percent increase in earnings per share over the same
period a year ago, when net income was $34.6 million.
Finish Line comparable store sales on a month-to-date
basis for the period of November 27 through Dec. 18, 2011 increased 7.0 percent
on top of a 4.5 percent increase for the same period a year ago.
"Our nearly 8 percent comp increase and EPS gain
of more than 37 percent in the third quarter was another strong performance for
our company," said chairman and chief executive officer Glenn Lyon. “It
is the interplay of social media and technologies such as mobile along with
digital and bricks and mortar channels that is the sweet spot for Finish Line.
Our strategic plan has led us to develop a strong presence on all of these
fronts while working to keep our brand relevant everywhere. We continue to
invest with purpose in technology, marketing and digital to drive the Finish
Line brand business while also supporting a multi-divisional growth strategy.
We are focused on executing this plan while also moving with speed and
innovation to take advantage of the right opportunities to grow our business
and drive shareholder value."
Nike posts 18% sales gain
Nike, Inc. reported revenues increased 18
percent in its second quarter ended Nov. 30, and advanced 16 percent on a
currency-neutral basis. Earnings rose 2.6 percent due to the impact of a lower
gross margin but came out slightly ahead of Wall Street's expectation. Futures
orders rose 13 percent year over year.
"Our strong second quarter results
demonstrate that the Nike, Inc. portfolio is a powerful engine for
growth," said Mark Parker, president and CEO, Nike, Inc. "We’re able
to accomplish this by staying focused on what we do best – deliver innovative
products and experiences that serve athletes, inspire consumers and reward our
shareholders. Going forward we’ll continue to use the unique power of our
portfolio to drive growth, manage risk and connect with consumers."
Revenues for Nike, Inc. increased 18 percent to $5.7 billion, up 16 percent on
a currency-neutral basis. Excluding the impacts of changes in foreign currency,
Nike Brand revenues rose 18 percent with growth in every geography except Japan
and in all key categories except Action Sports. Revenues for Other Businesses
increased 5 percent with minimal impact from changes in currency exchange
rates, as growth at Converse more than offset lower revenues at Nike Golf, Cole
Haan, Hurley and Umbro.
Gross margin declined 260 basis points to 42.7 percent due primarily to higher
product costs, which more than offset the positive effects of growing sales in
our Direct to Consumer operations, price increases and ongoing product cost
reduction initiatives.
Selling and administrative expenses grew at a lower rate than revenue, up 13
percent to $1.8 billion. Demand creation expenses increased 12 percent to $644
million driven by marketing support for key product initiatives and investments
in consumer events for the Nike Brand. Operating overhead expenses increased 13
percent to $1.2 billion due to additional investments made in our wholesale and
Direct to Consumer businesses.
China provides 80% of US footwear imports
An article a recent Wall Street
Journal said that China accounts for about 80% of U.S. shoe imports;
imported-footwear prices in November were up 6.1% from a year earlier. It
accounts for about 60% of furniture imports; imported-furniture prices also
were up 6.1%. About 80% of U.S. luggage imports come from China; prices in the
category that includes luggage and similar goods rose 8.3% in November.
Those
higher costs are one reason that U.S consumer prices have risen this year,
despite the weak economy. Economists expect Friday's inflation report from the
Labor Department to show that, excluding the volatile food and energy
categories, November consumer prices were up 2.1% from a year earlier, on par
with October's rise.
That's
relatively low, historically speaking, and unlikely to give Federal Reserve
policy makers pause in their efforts to boost the economy. But it marks the
biggest gain since October 2008.
Over the
past two years, the cost of furniture that Hooker Furniture Corp.
buys from China has risen steadily, says Paul Toms, CEO of the Martinsville,
Va., company. In September, Hooker raised prices on two-thirds of its product
line–everything it hadn't introduced in the past year–by 5%.
With the companies
Chinese suppliers raising wages to retain employees, Mr. Toms suspects there
will be more price increases to come. "We're in a labor-intensive
industry, and it's probably not one of the more-desirable industries for folks
to work in," he says. "We think our suppliers are seeing labor cost
increases in the 20% to 30% range."
According
to China's Ministry of Human Resources and Social Security, 21 provinces and
municipalities had, on average, instituted annual minimum wage increases of 22%
by October. Officials in Shenzhen, in China's southern manufacturing heartland,
said last month that they will raise the city's minimum wage by 15% in January,
hoping to attract more workers.
The
months ahead may bring U.S. companies some import-price relief. Commodity
prices have fallen sharply from their spring highs. A slowing economy, the
product of earlier efforts to cool growth, as well as faltering demand from
Europe, has checked Chinese authorities' willingness to let the country's
currency gain against the dollar.
But
rising affluence, growing opportunities in China's interior and a declining
youth population are putting upward pressure on Chinese manufacturing wages
that will prove difficult to stem.
Until a
couple of months ago, most of the largely Chinese-made shoes at Eugene Running
Co. cost about $100. But as companies rolled out new models in October and
November, they also pushed through higher prices for the first time since 2007.
"Everybody
has upped their shoes $5 or $10," says Laura Coll, who co-owns the Eugene,
Ore, store with her husband Bob. "Mizuno [Corp.] did a $15 increase on all
of their shoes."
Rising
wages in China aren't new, says Bank of America-Merrill Lynch economist Ethan
Harris. Pay there has been going up for years. What's different now, he says,
is that labor costs have reached a point where Chinese exporters can no longer
easily absorb them, and are instead passing them on. That's particularly true
for labor-intensive items like shoes.
In a note
to clients early this year, Mr. Harris estimated that labor accounts for
roughly half the export cost of a Chinese-made sneaker."I think it put
them up against their profit wall, and then the pass through started to get quick,"
he says.
Abicalcados to sing new agreement with APEX
The Brazilian Footwear Association (Abicalçados) will
be signing a fresh agreement with the Brazilian Export Promotion Agency (APEX-Brazil)
on January 17th during the Couromoda show in Sao Paolo to pinpoint a number of
commercial initiatives for overseas markets considered priority for footwear
exports. A study was carried out by the organization which is linked to the
Federal Government in conjunction with the companies associated with the
Brazilian Footwear project – a program whose aim is the promote exports from
the sector.
“At the end of the study and with the help of the
know-how of the companies we established a ranking of 40 countries with the
potential for importing Brazilian footwear”, stated the coordinator of
Abicalçados projects, Cristina Körbes. The priority export markets for 2012 are
South Africa, Russia, UAE (to be prospected), China (for more prospecting and
to open it up), Italy, France, USA and Colombia (for consolidation and positioning
Brazil’s image).
According to Körbes, the chosen markets must be
studied and action plans set up which will be sent to the companies associated
with Brazilian Footwear, which will attend either as commercial
missionsorwill participate in local fairs. The schedule of fairs
and initiatives will be revealed after the signing of the agreement with
APEX-Brasil has taken place since there could be some changes as the plan
commits the total investment of the program, which will last one year.
What can be anticipated, according to Körbes, is that
Abicalçados will participate in the studies providing infrastructure and human
resources as well as offering consultations for the companies associated to the
program. In addition, Abicalçados will also check out the investments made in
the chosen markets which are the main priority of the export program.
Mexican footwear industry working on Chinese agreement
The Mexican footwear industry has asked for
consultations to take place between Mexico and China based on the latter’s
Membership Protocol to the WTO so as to request that “Commercial Measures” be
taken. The Presidents of the Guanajuato and Jalisco State Footwear Chambers
(CICEG and CICEJ respectively) as well as the National Footwear Chamber met in
Leon on December 12th with Economic Secretary Bruno Ferari so as to hand in the
formal request for bilateral consultations between Mexico and china.
The Mexican industry asked the authorities under the
protection of the Membership Protocol of China to the World Trade Organization
(WTO) that the “disorganization of markets that is behind the imports of
footwear of Chinese origin into Mexico”, be resolved mutually and bilaterally.
At the same time the formal request solicits “Commercial Measures” be imposed
in the case that the bilateral consultations fail to yield a result.
The industry has enough evidence and sufficient
elements to demonstrate the threat of severe damage that the Mexican footwear
industry is facing from Chinese imports and the exacerbation of the issue after
the elimination of the temporary duties on Chinese products last December 11th.
The President of CICEG, Armando Martín Dueñas,
expressed confidence that the economics secretary would accept the request
made. He explained that “several months ago the footwear chambers have been
presenting to the authorities all the necessary elements so that the secretary
can take the appropriate measures. He confirmed that “they are certain that the
Guanajuato footwear industry will soon recuperate its pace of growth if the
threat caused by the abolition of the temporary import duties is removed”.
At the same time the President of CICEJ, Juan Alonso
Niño, added, “The Mexican government is aware that the footwear industry is one
of the most representative sectors in the country, both due to the number of
jobs it generates and the economy that it sustains. He also said that the
manufacturers “can be certain that everything possible will be done to avoid
the serious crisis which is about to come upon us”.
Both Presidents were confident that if the requested
Commercail measures were introduced then both large and small factories would
resume their growth as they are in the two principal states in Mexico where
footwear is produced. They also stated that “sufficient legal mechanisms exist”
to impose Commercial Measures” as they has insisted to the Economics Secretary
responsible for dealing with this matter.
Both Presidents made it quite clear that if bilateral
consultations with China failed and the disorganization in the footwear market
were to continue as a consequence, than the economics secretary could impose a
“Commercial Solution” once the legal formalities had been adhered to.
Key Data:
1.
From 2000 to 2010 imports of
Chinese footwear into Mexico increased by 475%. From January to September 2011
such imports grew by 32%
2. If this trend were to continue, between 2011 – 2015
local production would fall by 51% with the loss of 35,000 jobs in 2012 and in
this five year period the closure of 700 factories and the loss of 55,000 jobs.
3.
With the end of compensatory
quotas 62,000 companies are endangered in all sectors, which generate 570,000
jobs and which, in the case of the footwear industry, produce 244 million pairs
of shoes each year.
Based on the case outlined above it would appear that the Economics Secretary
has some hard decisions to take. The freeing up of footwear imports from China
will most definitely prejudice Mexico’s traditional footwear industry as well
as cause substantial job losses.
UPHOLSTERY
Pending home sales advance in Nov.
MarktWatch said last
week that pending home sales rose 7.3% in November to the highest level in 19
months, according to an industry trade group. The National Association of
Realtors said its pending sales index rose to 100.1 in November from a revised
93.3 in October, and it's now 5.9% above its year-ago level.
"Housing
affordability conditions are at a record high and there is a pent-up demand
from buyers who've been on the sidelines, but contract failures have been
running unusually high," said Lawrence Yun, NAR's chief economist.
"Some of the increase in pending home sales appears to be from buyers
recommitting after an initial contract ran into problems, often with the
mortgage." By region, pending home sales rose 14.9% in the West, 8.1% in
the Northeast, 4.3% in the South and 3.3% in the Midwest. An index reading of
100 is equal to the average level of contract activity during 2001. A sale is
listed as pending when the contract has been signed but the transaction has not
closed. Not all contracts lead to closings.
GST finances
Online news service
Debtwire published a report earlier this month on automotive upholstery leather
makers, GST Autoleather highlighting concerns over the company’s finances.
Particularly since the Earthquake and Tsunami in Japan earlier this year.
Debtwire
say that the US$135 million refinancing led by ING Bank for GST Autoleather has
‘skidded to a halt’, with a volatile market and the company’s delicate finances
causing interested banks to step back.
Debtwire
say that the European sovereign debt crisis is just the latest setback for the
Michigan based company.
Efforts
to refinance the loans backing private equity firm Advantage Partners’ US$300
million purchase of GST in April 2008 stalled following the Japan Earthquake
and Tsunami in March. The disaster caused GST’s main Japanese clients – Toyota
and Honda – to drastically scale back production and cut orders according to
Debtwire sources.
ING,
which co-arranged with GE Capital a US$172 million debt package to back
Tokyo-based Advantage Partners’ buyout, resumed its pitches to potential
investors in Hong Kong and Tokyo over the summer, the sources said.
Dennis
Hiller, President and CEO, GST Autoleather told Leather International, ‘Even
though we make it a practice not to comment on unauthorized press releases, I
can state this one contains many factual deficiencies and attempts to draw the
wrong conclusions.’ GST would make no further comment on the Debtwire report.
Debtwire
claim that this is not the first time that the company has required financial
help since the acquisition. A slide in Toyota’s sales impacted GST severely in
2008, causing it to breach financial covenants at the end of that year.
The
business has stabilized since then, although their costs have been higher than
expected, according to a Debtwire source. The final acquisition of Seton in
early January has helped group income, and given GST additional business with
premium carmakers in Germany, the source said.
New single family housing up
New construction of U.S.
houses rose 9.3% in November to a seasonally adjusted annual rate of 685,000 -
the highest annual rate since April 2010 -- with multi-family activity leading
growth, according to Commerce Department data released Tuesday. Starts for
multi-family residences rose 32.2% in November to a rate of 230,000, the
highest level since September 2008. Meanwhile, starts of new single-family
homes rose 2.3% to an annual rate of 447,000. Starts in October were revised
down to 627,000 from a prior estimate of 628,000. Economists polled by
MarketWatch had expected an annual rate of 635,000 for starts in November.
Building permits, a leading indicator of housing construction, rose 5.7% to a
seasonally adjusted annual rate of 681,000, the highest annual rate since March
2010.
Homebuilder confidence up
Homebuilder confidence rose
to a 19-month high in December, though the gauge still remains in weak
territory, according to an index released Monday. The National Association of
Home Builders/Wells Fargo housing market index rose to 21 in December from 19
in November, marking the third monthly rise in a row. Economists polled by
MarketWatch had anticipated a 20 reading. The index for November was downwardly
revised from 20. The seasonally adjusted index, which correlates closely with
single-family housing starts, is designed so that readings over 50 are
considered "good," which hasn't been the case since April 2006.
RoomStore reorganization
Top 100 retailer The RoomStore hopes that bankruptcy
reorganization will help it build better economies in distribution and
marketing and make it become a leaner and more competitive operation.
This week the company announced plans to close 24 stores and a
distribution center, leaving it with about 37 stores. The company is seeking
U.S. Bankruptcy Court approval to sell their inventory and other assets at an
auction next month.
Additionally, the retailer is seeking authority to designate up to
15 additional stores for closure by Jan. 31, 2012.
The RoomStore, which filed for Chapter 11 bankruptcy protection on
Dec. 12, filed documents seeking to close the stores last week and asked to
have bids submitted at auction on Jan. 4.
No stalking horse bidder was named, but the company said it reserved
the right to name one before the auction date.
About 300 employees will be affected by the closings, some of whom
may move to other locations, said RoomStore CEO Steve Giordano, who rejoined
the company in November.
The RoomStore said the underperforming locations were chosen prior
to its bankruptcy filing during a review of operations.
The majority of the closings affect stores in Texas, with 15
occurring in the state, including five locations in San Antonio. The El Paso
distribution center is attached to the Gateway Boulevard store, which also is
targeted for closing, Giordano said.
The closings will leave it with 10 stores in the Dallas-Fort Worth
and Waco markets, but that number is not necessarily final, Giordano said.
It will close three locations in both Virginia and Maryland and
leaving it with ten stores in each state. It also plans to close one store each
in Pennsylvania and Florida.
Earlier this year, the company began closing full-line stores in
Houston and Baltimore and clearance centers in Norfolk, Va., and Fayetteville,
N.C.
The retailer also recently left the Birmingham, Ala., market,
where it operated a store and warehouse. The moves will leave the retailer with
no locations in Alabama, having closed one earlier this year and the Dalton
location through bankruptcy.
The company closed a distribution center in Houston earlier this
year, and Giordano said the Dallas distribution center will be a different
size.
He said the company will have one main distribution center in
Rocky Mount, N.C., and a cross-docking facility in Jessup, Md. The Dallas
distribution center will manage inventory coming from Rocky Mount.
Prior to the filing the company had 64 stores and five warehouses
in eight states, bankruptcy court documents said.
When the company filed for bankruptcy, it listed assets of $56
million and debts of about $52.5 million, including 13 unsecured furniture
industry creditors owed $3.8 million.
The retailer said declining sales and depleted cash due to
repaying much of a revolving loan this summer, led to the filing.
"When you are out visiting the stores like I am and you see
the desire on these people to make the company stronger it does give you
strength even though it's a tough job. It gives you a lot of faith in the
future," Giordano said.
RAW MATERIALS
U.S.
Due in large part due a surge in raw hide and wet blue
exports reported during the Holiday’s coupled with some new leather orders
placed in Asia, tanners were active. This created a bottoming of prices with
producers asking on average $2.00/pc higher this week than before Christmas
Latin America/Europe
These markets were closed since our pre holiday report
and we will have updated information in our next issue.
LOOKING AHEAD
It might be too early, but there are signs that things
are looking up for American business, as per a number of stories above.
Good retail sale that include leather products may
have bolstered increased quantities in previously placed leather orders as
well. All this is evidenced by a significant round of hide buying by tanners
which created a market bottom. Meanwhile, producer who have sold some good
quantities of late, are doing their best to turn the bottoming into a rally.
We’ll know more about this in our next issue, but as of this moment, prices
have a decent chance to advance somewhat. Further, a stabilization/bounce in
the U.S. should also have a positive affect on Latin America and Europe.
Leather Table| Shoe Upper Leather | This Week | Last Week |
| Full Grain aniline, cowhide 2.0 mm and down | 2.70-2.80 | 2.70-2.80 |
| Full Grain aniline, cowhide 2.0/2.4 mm | 2.75-2.85 | 2.75-2.85 |
| Full Grain aniline, cowhide 2.4 mm and up | 2.75-2.85 | 2.75-2.85 |
| Corrected leather, cowhide 2.0 mm and down | 2.15-2.20 | 2.15-2.20 |
| Corrected leather, cowhide 2.0/2.4 mm | 2.15-2.20 | 2.15-2.20 |
| Corrected leather, cowhide 2.4 mm and up | 2.15-2.20 | 2.15-2.20 |
| Upholstery Leather | This Week | Last Week |
| Full Grain aniline, cowhide 1.0/1.4 mm | 3.05-3.10 | 3.05-3.10 |
| Full Grain aniline, cowhide 1.4 mm and up | 3.40-3.50 | 3.40-3.50 |
| Corrected leather, cowhide 1.0/1.4 mm | 2.80-2.90 | 2.80-2.90 |
| Corrected leather, cowhide 1.4 mm and up | 3.20-3.30 | 3.20-3.30 |
| Split Leather | This Week | Last Week |
| Embossed, smooth 1.4/1.6 mm | 1.20-1.25 | 1.20-1.25 |
| Embossed haircell 1.4/1.6 mm | 1.20-1.25 | 1.20-1.25 |
