Details as follows:
GENERAL NEWS
Tanners struggling to get leather prices
higher
Tanners in China reported this month that
they are able to pass on a little of their increased raw material costs,
especially to their domestic customers. However, whatever gains can be obtained
are comparatively minimal. One source said that one way they are coping is to
find improvements in productivity towards lowering operating costs.
Tanners are raising prices, and are also
focusing on productivity improvements and costs, as we can't simple raise
pricing in today's marketplace to cover the higher hide cost gap.
Container shortages still
an issue
Difficulty in obtaining
vessel space for export/importers is not limited to the hide, footwear, or
upholstery business. Sources contacted this week note that shortages of ocean
containers will linger on into the second half of 2011.
Chinese manufacturers, which control the
lion’s share of the box market, will take until then to ramp their production
back up to its prerecession rate. One exporter said that they all but shut
down in 2009, when the recession scuttled ocean shipping. Plus cargo lines that
stretched delivery times between the U.S Europe and Asia to save fuel and cash
still face thin profit margins and tough emissions rules.
Kiplinger reported that the hardest hit are
exporters based 100 miles or more inland from ports. Ocean carriers aren’t
keen to restore costly services that routinely used railroads to ship empty
containers cross-country. Companies may need to enlist brokers to find boxes or
to truck products to ports where containers are more readily available.
COTANCE meeting in Bologna
Perspectives for
Leather Markets - the Cotance 2010 round table will take place in Bologna on
October 11, prior to the Lineapelle exhibition. The event gathers the tanning
sector’s key industrial players, their suppliers and customers, academia,
governmental and political authorities and high-level civil servants.
Participants are
selected on their perceived capacity to influence the sector’s governance, a
kind of summit for the European leather business community. The round table
focuses on the market perspectives for leather and leather products in Europe
and at international level as the sector re-emerges from the recession that hit
the global economy towards the end of 2008.
Attendance is by
invitation only. However a limited number of seats will be offered upon
registration to Cotance before the event. An admission fee of 100 euros will be
requested. If you are interested in taking part in the round table, please
download the
pre-registration form, on the Cotance website - www.euroleather.com. You
will receive confirmation of your registration by early September.
Taiwanese footwear makers
invest in Indonesia
China Leather.org announced
recently that Indonesia’s footwear industry has won an investment of US$550m
from six Taiwanese and South Korean footwear manufacturers who are relocating
their plants from China and Vietnam, according to the Indonesian Shoes
Association (Aprisindo).
The relocation, mainly to East
Java, has been prompted by rising labor costs and raw material issues in China
and Vietnam, and is expected to finish within this current year.
In all, six manufacturers are
outsourcing a significant amount of shoes and products for world famous brands,
including Nike, Adidas, Reebok and Geox.
Among these manufacturers, four
Taiwanese firms who produce shoes for Nike and Reebok are completing their
relocation with a total investment capital of $400m. In the meantime, two South
Korean producers based in Vietnam, who outsource for Adidas and Geox, will
invest $150m in Indonesia.
‘Geox was targeted to produce
up to 100,000 pairs of shoes per month, while Adidas would produce up to
850,000 pairs of shoes until the end of 2010’, Eddy Widjanarko, chairman of
Aprisindo said. ‘In January 2011, Adidas is targeted to produce 1.2m pairs of
shoes per month’, he added.
Aprisindo said further footwear
manufacturers are expected to relocate to Indonesia over the next few years,
but that current electricity tariff hiking will hamper further investment.
Five Fuzhou tanneries to
close
In an announcement issued by
Economic and Trade Commission in Fujian province, five tanneries in Fuzhou city
China with annual production below 20,000 pieces of standard cattle equivalent
are included in the list of enterprises to face closure.
The five tanneries are Fuzhou
Chaoqi Tannery, Changle Shengda Leather Products Co, Liuchangping Tannery,
Minguan Leather Co, and Minhou Xiangqian Tannery. The companies listed in the
announcement will be closed by the end of September of this year. Their
production facilities will be dismantled at the end of the year. The
announcement is part China's elimination of outdated production capacity, in
other words their production and effluent treatment systems fall below
environmental standards, especially as each tannery has a low production volume
(under 30,000 pieces per annum).
New leather center in
Liaoning Province
Fuxin Leather Production Base
is a newly established leather processing centre located in Liaoning province,
Northern China. The local authority plan to build a modern leather complex for
northern China.
Fuxin Mayor, Pan Liguo, is
behind the development of an important leather processing base, and paid a
visit to the area on July 22.
During his visit Mayor Pan
visited the central effluent treatment centre, Richina in Fuxin, and Henxin
Leather And Fur Co. The Mayor carried out the groundbreaking ceremony for
Henxin Fur and urged the production base to improve and complete construction
of the facilities and services system in order to attract other businesses.
When talking about the issues
of environmental protection hestressed the balanced and coordinated
development of Fuxin city with the development of a tanning cluster.
Indian leather exports
still down
Recovery in leather exports has
been cut short as consignments dropped year-on-year by 3 per cent to Rs 1,266
crore in June, with a weak euro playing spoilsport.
India's leather exports,
employing 2.5 million people, was Rs 1,307 crore in June last fiscal.
"Though things are
improving, currency fluctuation is a serious issue for the industry,"
Council for Leather Exports Chairman Habib Hussain told PTI.Europe accounts for
60 per cent of India's leather exports which aggregated to Rs 16,135 crore last
fiscal.
A weak euro results in reduced margins for the exporters since realizations
from the overseas currency into rupee drops.
Since January, 2010 value of euro against rupee has declined by over 9 per
cent. Crisis in some of the European economies like Greece, Spain and Portugal
has hit the euro.
Impacted by global slowdown, leather exports had dropped in 2009-10. However,
on a low base of last fiscal, shipments had improved in the first two months
this year.
For the April-May period, the leather exports had improved by 29 per cent in
dollar terms, as per the data of the council.
However, the recovery proved short-lived and exports dropped again in June.
"Visitors want to come here, but prices are not competitive," Hussain
said.
For June, the segments which showed downward growth includes saddlery and
harness and footwear components. However, certain categories also showed growth
like finished leather and leather goods.
Acespiel to take over
CEC-FECUR
The Spanish Federation of
Tanners, known as Acexpiel, has announced that it will take on the
responsibilities of the country’s Tanners’ Confederation.
This means that Acexpiel will
now be the representative body of the tanning industry in Spain. Its members
agreed the move at a meeting in Barcelona at the end of July.
Acexpiel will continue to carry
out its previous function of promoting Spanish leather in export markets, etc.
The industries leaders hope that this will help the nations tanning.
Regional tanning industry
groups will still be able to continue their own activities, but Acexpiel has
made it clear that tanneries across Spain will work with the national body
directly from now on, rather than connect to the national organization through
their regional associations.
While CEC-FECUR worked as a
confederation of the different regional associations, Acexpiel will work more
directly with individual tanners. The organization said at the time of the
announcement that the current size of the leather industry in Spain and the
reduced resources of many of the regional bodies were among the main drivers of
the new set-up.
Acexpiel’s current president,
Jaume Alvira, will continue in the role until the organization meets again in a
few months to hold new elections.
The latest figures from
CEC-FECUR show that there are currently 97 tanneries in operation in Spain, 57
of them in Catalonia, 27 in Valencia, nine in Murcia, three in Aragon and one
in the Basque Country.
ECONOMIC NEWS
U.S. July retail figures
discouraging
Master Card Advisors’Spending
Pulse reported that Americans remained reluctant to spend at stores in July,
especially on pricier items like
jewelry, though they let go of some money for travel, according to data
released today.
Revenue from high-end jewelry,
which had held steady in June, plummeted in July from a year earlier, when the
figures already were dismal.
Furniture also suffered as the
boost from homebuyer tax credits wore off. Shoppers even pulled back on shoes
and children's clothing, while luxury spending — excluding baubles — was
virtually unchanged.
The figures, which include
transactions in all forms including cash, signal that spending remains choppy
as shoppers grapple with an almost 10 percent unemployment rate and tight
credit.
Online revenue offered one
bright spot, gaining for the 12th straight month. But travel spending —
including airlines, trains, rental cars and hotels — also rose from July 2009,
when it fell almost 2 percent.
The second-straight month with
weak luxury sales contrasts with earlier in the year when the wealthy spent a
bit more freely. The Standard & Poor's 500 stock index has tumbled 9.5
percent since its high-water mark in late April, and home values fell 3.2 percent
in the first quarter, according to the Standard & Poor's/Case-Shiller
20-city home-price index.
The latest data from
SpendingPulse follows government reports,
released Tuesday, that also show consumers being picky about how they spend
their money. The Commerce Department said personal spending was unchanged in
June, the third straight lackluster month. And the personal savings rate
rose to 6.4 percent of after-tax incomes in June.
"The tide (in spending)
doesn't seem to be rising overall," said Michael McNamara, vice president
of research and analysis for SpendingPulse. "There hasn't been a
consistent improvement that has been sustainable."
Instead, shoppers seem to be
shifting their spending more than usual each month, he said, including extra
movement in July away from discretionary items.
"Recoveries tend to not
happen in straight lines," he said. "We are in a trough, but the
question is, how long will the trough last?"
July marks the end of most
retailers' fiscal second quarter. But it's the least important month in the
quarter because stores use it to clear out summer leftovers and bring in fresh
fall merchandise.
This year, stores discounted
more than planned in July on summer items to pull in recession-scarred
shoppers, whose confidence in the economy is falling.
Here are SpendingPulse's
figures comparing revenue for July 4 through July 31 with the same period a
year earlier, by product category.
The report said that overall
clothing sales slipped 1.1 percent from a year ago, when they dropped 5.2
percent. Children's clothing fell 3.7 percent, the first decline in 10 months.
Revenue in women's clothing fell 1.9 percent, while men's clothing sales
dropped 16.3 percent.
Footwear was down 2.9 percent from a year ago when revenue
fell 7.4 percent.
Furniture: fell 8.2 percent from a year ago, when business fell
10.5 percent. July's decline marked three straight months of decreases after a
surge early in the year as the category benefited from housing tax credits.
Big spenders holding back
A Wall
Street Journal article reported this week that wealthy Americans aren't
spending so freely anymore. And the rest of us are feeling the squeeze.
The
question is whether the rich will cut back so much as to tip the economy back
into recession - or if they will spend at least enough to sustain the recovery.
The answer
may not be clear for months. But their cutbacks help explain why the rebound
could be stalling.
The
economy grew at just a 2.4 percent rate in the April-June quarter, the
government said Friday, much slower than the 3.7 percent rate for the first quarter.
Economists
say overall consumer spending has slowed mainly because the richest 5 percent
of Americans - those earning at least $207,000 - are buying less. They account
for about 14 percent of total spending.
These
shoppers have retrenched as their investment values have sunk and home values
have languished.
In
addition, the most sweeping in a generation are due to expire in January, and
lawmakers are divided over whether the government can afford to make any of
them permanent as the federal budget deficit continues to balloon.
President
Barack Obama wants to allow the top rates to increase next year for individuals
making more than $200,000 and couples making more than $250,000. The wealthy
may be keeping some money on the sidelines due to uncertainty over whether or
not they will soon face higher taxes.
Home
values fell 3.2 percent in the first quarter, according to the Standard &
Poor's/Case-Shiller 20-city home-price index.
Think
of the wealthy as the main engine of the economy: When they buy more, the
economy hums. When they cut back, it sputters. The rest of us mainly go along
for the ride.
Earlier
this year, gains in stock portfolios had boosted household wealth. And the rich
responded by spending freely. That raised hopes the recovery would strengthen.
No
longer. The dizzying plunge on Wall Street in May and June and lingering
stock-market turbulence have shrunk Americans' wealth. The Dow fell 10 percent
for the April-June quarter. The broader Standard & Poor's 500 index dropped
11.9 percent. And the rich are once again more cautious about spending,
economists say.
The
affluent went back to tightening their belts in June after months of vigorous
showing.
At the
same time, government reports show shoppers as a whole cut back on their
spending in both May and June.
Federal Reserve says U.S.
economy slows
The U.S. economy lost
momentum in the second quarter of the year. Real gross domestic product -- the
inflation-adjusted, seasonally adjusted value of all goods and services
produced in the United States -- rose at a 2.4% annualized rate in the second
quarter, well below the average 4.4% increase over the last six months.
The rate of expansion in the
first quarter was revised up to a 3.7% rise compared with the prior estimate of
a 2.7% increase. Much of the deceleration in the second quarter was due to the
trade sector. The 2.4% increase in GDP was close to the 2.5% expansion expected
by economists surveyed by MarketWatch. (Fixes time period in the description of
the deceleration.)
More evidence of an economic
slowdown
MarketWatch reported this week
that some Federal Reserve district banks reported stalled or slower growth in
mid-July, according to a report on current economic conditions, commonly known
as the Beige Book, released by the central bank on Wednesday. The report is
consistent with the notion that the economy lost some momentum at the end of
the second quarter.
The report found the economy
continued to expand, on balance. The Cleveland and Kansas City Fed banks
reported stalled conditions. The Atlanta and Chicago Fed banks reported that
the pace of growth had slowed recently. Among those regional banks reporting
improvements, several noted the increases were modest, the report said. The
tone of the latest Beige Book is decidedly less optimistic than that of the
prior Beige Book report released in early June. That report found that
conditions had improved in all 12 Fed districts consistent with an expanding
recovery.
FOOTWEAR
Adidas raised its full-year
earnings forecast after strong sales around the World Cup as well as a
resurgence at Reebok helped drive up second-quarter revenues and profit. Group
sales in North America grew 8% on a currency-neutral basis, driven by a 7%
sales increase for adidas and a 30% sales increase for Reebok in the region
during the second quarter.between €2.05 and €2.30. Last year's figure was
€1.22.
The company, based in Herzogenaurach, Germany, confirmed previously released
second-quarter figures: an increase in net earnings to €126 million ($166
million) from €9 million a year earlier, and an 18.7 % increase in revenues to
€2.92 billion from €2.46 billion.
"We had an outstanding first half year driven by the FIFA World Cup 2010
and the resurgence of the Reebok brand in North America," CEO Herbert
Hainer said. "Sales momentum at both Adidas and Reebok accelerated in the
second quarter."
During the second quarter of
2010, Group revenues increased 11% on a currency-neutral basis.
Currency-neutral revenues in Western Europe increased 13% supported by strong
growth in the football category. Currency-neutral sales in European Emerging
Markets increased 25% driven by double-digit growth in both the Wholesale and
Retail segments.
Group sales in North America grew 8% on a currency-neutral basis, driven by a
7% sales increase for adidas and a 30% sales increase for Reebok in the region
during the second quarter. Currency-neutral sales in Greater China declined 18%
due to the continued efforts to reduce inventories in the market.
Currency-neutral sales in Other Asian Markets and in Latin America were up 11%
and 27% on a currency-neutral basis, respectively. Currency translation effects
had a positive impact on segmental sales in euro terms.
Group revenues grew 19% to €2.917 billion in the second quarter of 2010 from
€2.457 billion in 2009.
The Group's gross margin increased 4.0 percentage points to 48.9% (2009: 45.0%)
in the second quarter mainly due to lower input costs, less clearance sales and
a larger share of higher-margin Retail sales as well as positive currency
effects, particularly related to the Russian rouble.
Group gross profit increased
29% to €1.424billion (2009: €1.105 billion). Other operating expenses as a
percentage of sales were stable compared to the prior year at 43.9%. Higher
marketing expenses were offset by a decline in operating overhead expenditures
as a percentage of sales. As a result of the higher gross margin, the Group's
operating margin increased 3.8 percentage points to 6.7% in the second quarter
of 2010 versus 2.9% in 2009.
Operating profit increased 172%
to €195 million in the second quarter of 2010 compared to €2 million in 2009.
In the second quarter of 2010, the Group's net income attributable to
shareholders amounted to €126 million (2009: €9 million
"We had an outstanding first half year driven by the FIFA World Cup 2010
and the resurgence of the Reebok brand in North America," commented
Herbert Hainer, adidas Group CEO. "Sales momentum at both adidas and
Reebok accelerated in the second quarter with currency-neutral sales increasing
13% and 16% respectively."
In the first half of 2010, Group revenues increased 7% on a currency-neutral
basis driven by growth in Wholesale, Retail and Other Businesses. Currency
translation effects had a positive impact on sales in euro terms. Group
revenues grew 11% to €5.590 billion in the first half of 2010 from €5.034
billion in 2009.
First half Group sales increase driven by the Wholesale and Retail segments
The Adidas Group's sales increase in the first half of 2010 was driven by
double-digit growth in the Retail segment as well as higher sales in the
Wholesale segment and in Other Businesses. Currency-neutral Wholesale revenues
increased 6% during the period driven by higher Adidas and Reebok sales.
Currency-neutral Retail sales increased 16% versus the prior year as a result
of double-digit Adidas and Reebok sales growth. Revenues in Other Businesses
increased 3% on a currency-neutral basis due to sales growth at
TaylorMade-adidas Golf.
In the first half of 2010,
currency-neutral adidas Group sales increased in all regions except Greater
China. Revenues in Western Europe increased 8% primarily as a result of
double-digit sales increases in the UK, Germany and Spain. In European Emerging
Markets, Group sales increased 13% on a currency-neutral basis due to growth in
most of the region's markets, in particular Russia. Sales for the adidas Group
in North America increased 10% on a currency-neutral basis due to strong
increases in both the USA and Canada. Sales in Greater China decreased 16% on a
currency-neutral basis. Currency-neutral revenues in Other Asian Markets grew
4% due to increases in most markets. In Latin America, sales grew 23% on a
currency-neutral basis, with double-digit increases in most of the region's
major markets.
The gross margin of the adidas Group increased 3.7 percentage points to 48.8%
in the first half of 2010 (2009: 45.1%). This development was mainly due to
lower input costs, less clearance sales and a larger share of higher-margin
Retail sales. Positive currency effects related to the appreciation of the
Russian rouble also had a minor effect on Group gross margin. As a result,
gross profit for the adidas Group grew 20% in the first half of 2010 to €2.727
billion versus €2.269 billion in the prior year.
The operating margin of the adidas Group increased 5.6 percentage points to
8.1% in the first half of 2010 (2009: 2.6%). The operating margin increase was
primarily due to the higher gross margin as well as lower other operating
expenses as a percentage of sales.
As a result, Group operating
profit increased 251% to €454 million versus €129 million in 2009. Other
operating expenses as a percentage of sales decreased 1.6 percentage points to
42.8% in the first half of 2010 from 44.3% in 2009. In absolute terms, other
operating expenses increased 7% to €2.390 billion in the first half of 2010
(2009:€2.232 billion). Thereof, sales and marketing working budget expenditures
amounted to €756 million, which represents an increase of 20% versus the prior
year level (2009:€630 million). The increase was primarily related to higher
expenditures to support adidas presence at the 2010 FIFA World Cup. As a result
of the higher Group sales base, however, sales and marketing working budget
expenditures as a percentage of sales increased only 1.0 percentage points to
13.5% (2009: 12.5%).in an amount of€35 million. Consequently, the Group's
ratio.
Earnings per share now expected
to increase to a level between'2.50 and'2.62
In 2010, the adidas Group gross margin is now forecasted to increase to a level
approaching 47.5% versus 45.4% in 2009 (previously: increase to a level between
46.5% and 47.5%). Improvements are expected in all segments. Group gross margin
will benefit from lower sourcing costs as a result of reduced material costs
and lower capacity utilisation among suppliers. This effect is expected to
moderate in the second half of the year. Also, a higher share of sales from the
Retail segment, which carry a higher gross margin, is forecasted to support
Group gross margin development. In addition, lower levels of clearance sales
due to reduced inventory levels compared to the prior year as well as the
appreciation of the Russian rouble are forecasted to contribute to margin
increases. However, these positive effects are expected to be partly offset by
ongoing price pressures from a competitive retail environment, in particular in
more mature markets, and less favourable hedging terms compared to the prior
year.
Herbert Hainer stated: "The record first half performance and the
financial strength of our Group provides us with plenty of firepower to
accelerate our marketing and investment offensive in the coming quarters.
Whether it's toning, lightweight technologies or lifestyle, our brands are
right on the consumer pulse. The energy we are creating in the market this year
will be an important catalyst in propelling our Group to new heights in the
years to come."
DSW sales up
DSW Inc. announced net sales
for the second quarter ended July 31, 2010 increased 12.3% to $415.1 million
compared with $369.5 million for the quarter ended August 1, 2009. Same
store sales increased 12.0% for the comparable period versus a decrease of 2.9%
last year...
Net sales for the twenty-six
week year-to-date period ended July 31, 2010 increased 14.5% to $864.7 million
compared with $755.3 million for the twenty-six week year-to-date period ended
August 1, 2009. Same store sales increased 14.1% for the comparable
twenty-six week period versus a decrease of 3.8% last year.
The Company now estimates an
annual comparable store sales increase of approximately 7% to 9% and annual
diluted earnings per share of approximately $1.80 to $1.95 for fiscal
2010. This is updated from the Company's previous estimate of an annual
comparable store sales increase of approximately 6% to 8% and annual diluted
earnings per share of approximately $1.65 to $1.75 for fiscal 2010.
Fiscal 2009 annual diluted earnings per share were $1.23.
Weyco group profits off 57%
The maker of Florsheim, Nunn Bush and
Stacy Adams men's shoes reported net income of $1.28 million, , down from $2.18
million. Changes in the exchange rate between U.S. and Australian currency
resulted in an $800,000 loss for the quarter, against a gain of $870,000 in the
year-ago quarter.
Sales declined by 3%, to $48.7 million
from $50.1 million. Sales in the wholesale division declined to $35.3 million
from $35.9 million. Sales at Weyco's 35 Florsheim stores and Internet business
declined to $5.3 million from $5.4 million.
"The retail environment continues
to be challenging," said Tom Florsheim Jr., Weyco chairman and chief
executive, in a statement. "After an initial uptick in demand in the first
quarter, consumers have once again returned to a more cautious approach to
discretionary spending."
The company closed one store during the
quarter. On a same-store basis, sales declined by 1%.
Steven Madden does it
again
Steven Madden turned
in another stellar quarterly performance this morning. Net income for the Long
Island, N.Y.-based firm surged 63 percent to $19.8 million, up from $12.1
million, in the year-ago quarter.
Net sales were $158.7
million, up 36 percent from $116.5 million in the previous corresponding
quarter, thanks to robust growth in wholesale net sales for the group.
In particular, wholesale footwear net sales increased 40 percent in the second
quarter to $104.2 million, from $74.2 million last year, driven by solid gains
across all existing wholesale footwear divisions, as well as contributions from
the firm’s new men’s brand, Madden, in the first quarter, said Edward
Rosenfeld, chairman and CEO of Steven Madden.
The company’s retail division also saw gains of 4 percent for the period ended
June 30. Net sales were $29.5 million, versus $28.3 million in the previous
corresponding quarter, driven by a comparable store sales increase of 7.4
percent.
Gross margins improved across the board, and operating expenses as a percentage
of sales declined to 27 percent, from last year’s 32 percent, due to leverage
on increased sales.
“We are confident in our belief that the strength in our core business combined
with the growth opportunities from some of our new businesses position us to
achieve our long-term goal of doubling earnings-per-share by 2014,” said
Rosenfeld in a company statement.
On a conference call with analysts, Rosenfeld added there is an opportunity for
gross margins to be up in retail going into the back half, and the firm will
look for “significantly more opportunity” to grow the Madden Girl and Big
Buddha lines within the firm’s existing doors.
Timberland posts quarterly
loss
The
Timberland Company reported a second-quarter 2010 net loss of $23.5 million, after
a $13.2 million pre-tax charge for the impairment of certain goodwill and
intangible assets. In the year-ago period, the company lost $19.2 million.
Revenue increased 5.1% to $189.0 million, reflecting growth across North
America, Asia, and Europe.
North America revenue increased 6.6% to $92.0 million compared to the prior
year period, driven by growth in apparel and accessories. Europe revenue
increased 1.4% to $66.8 million versus 2009 second-quarter levels, and
increased 5.7% on a constant dollar basis. Double-digit growth in Italy,
Germany, and Scandinavia was partially offset by declines in the UK and France
as well as the impact from the strengthening of the U.S. Dollar. Asia revenue
increased 9.6% to $30.2 million compared to the prior year period, and
increased 4.8% on a constant dollar basis. Favorable foreign exchange rates, along
with the continuation of significant growth in Taiwan and China compared to the
prior year period, were partially offset by declines in the Asia distributor
business.
Global footwear revenue increased 3.7% to $131.6 million from the second
quarter of 2009, driven primarily by increased sales of our Timberland PRO
footwear in North America and a strong performance by the Europe wholesale
business, partially offset by weakness in Europe retail stores. Apparel and
accessories revenue increased 10.2% to $52.1 million compared to the prior year
period, due to increased sales of SmartWool accessories in North America and
Timberland brand apparel in Asia retail stores, partially offset by softness in
Europe. Royalty and other revenue decreased 3.8% to $5.3 million compared to
the prior year period primarily due to a decline in licensed kids' apparel in
North America.
Global wholesale revenue was up 8.3% to $117.5 million compared to the prior
year period, due to double-digit growth in North America and Europe, partially
offset by declines in Asia. Worldwide consumer direct revenue was flat compared
to the prior year period, as improved comparable store sales in Asia and the
net addition of 8 new Asia retail stores since the second quarter of 2009 were
offset by declines in Europe and North America. Overall, comparable store sales
were flat versus the second quarter of 2009. The company had 224 stores, shops,
and outlets worldwide at the end of the second quarter of 2010 compared to 220
at the end of the second quarter of 2009.
Operating
loss for the second quarter of 2010 was $33.3 million compared to an operating
loss of $36.4 million in the prior year period. A significant improvement in
gross margin due primarily to favorable pricing and channel mix as well as
lower input costs was partially masked by a non-cash impairment charge of $13.2
million primarily related to certain goodwill and intangible assets of the
IPATH and howies brands.
Jeffrey B. Swartz, Timberland's president and CEO, stated, "We are pleased
to report revenue growth and gross margin improvement in all three regions.
These results were achieved by focusing on our core outdoor equities and
executing against a consistent strategy to strengthen our brand globally. We
are optimistic about the progress that we are making, despite ongoing cost
pressures and macroeconomic uncertainty in key markets.
While
non-cash charges impacted our profitability for the quarter, our core business
saw marked improvement, a clear indication that our product and brand
initiatives are continuing to gain traction and that Timberland is positioned
for long-term success."
Skechers posts sales jump
Skechers
USA Inc. reported second quarter sales increased 68.9% to $504.9 million from
$299.0 million a year ago. Earnings climbed to $40.2 million, rebounding from
a loss of $5.9 million, a year ago.
Earnings
from operations reached $58.8 million versus a loss from operations of $7.7
million in the second quarter of 2009.
"Our second quarter net sales of over $500 million are a first in our
18-year history. In addition, we achieved record second quarter operating
income, net earnings and earnings per diluted share on the heels of a record
first quarter," said David Weinberg, chief operating officer and chief
financial officer. "The significant revenue growth is attributable to
strong operational execution and product development and delivery across our
domestic and international wholesale and retail channels, as well as via our
e-commerce platform. We believe our momentum is being meaningfully supported
and enhanced by our continued marketing efforts globally."
For the six months ended June 30, 2010, net sales were $997.6 million compared
to net sales of $642.4 million in the first six months of 2009. Earnings from
operations for the first six months were $139.8 million compared to a loss from
operations of $1.6 million in the same period of 2009. Net earnings were $96.5
million, compared to net earnings of $2.3 million in the first six months of
2009.
Gross profit for the second quarter of 2010 was $237.6 million or 47.1% of net
sales compared to $122.6 million or 41.0% of net sales in the second quarter of
last year. Gross profit for the first six months of 2010 was $475.1 million or
47.6% of net sales versus $248.0 million or 38.6% of net sales in the first six
months of 2009.
Weinberg also said that "SKECHERS' top-line growth, significantly
increased profitability and much improved margins are the result of our
consistent efforts to deliver fresh, innovative product supported by relevant
marketing around the world".
"Our
product is in high demand, inventory is clean, and our balance sheet continues
to strengthen. At quarter end, our cash position was over $273 million, even
though we accelerated factory payments of $64 million and made a capital
contribution of $30 million to our distribution center joint venture. We broke
ground during the second quarter on this new, more efficient, 1.8
million-square-foot facility in Rancho Belago, California. With a triple digit
increase in backlogs and double digit retail store comps, we believe our
momentum will continue."
Puma’s quarterly profit up
Puma's
second-quarter profit rose 16.4%. Revenue rose 2.5%, boosted by sales in the
Americas, which advanced 26%. Puma's second-quarter profit rose 16.4%. Revenue
rose 2.5%, boosted by sales in the Americas, which advanced 26%.
With
a "strong outlook" for the second half, management continues to
expect sales growth in the low to mid single-digits for the full year.Jochen
Zeitz, CEO, said, "PUMA performed according to plan in the second quarter
and we are gearing up for solid growth in the second half of the year based on
a strong outlook.
Given
an overall improvement of the global economies as well as our decisive measures
taken in the past 18 months to adjust our organization and processes to the new
market realities, we feel ready to re-engage with our long-term expansion plan
as of next year. "Phase IV revisited 2011-2015" shall enable us to
significantly tap into PUMA's long-term sales potential of 4 billion Euros and
beyond."
PUMA's brand sales in the second quarter - comprised of consolidated and
license sales - increased by 1.3% in Euro terms.
Consolidated sales in the second quarter increased by 2.5% in Euro terms to
€615.4 million ($787.7mm). Currency neutral, consolidated sales softened by
4.8% on high comparables after closeout sales and a high inventory availability
last year. Deliveries in June were impacted by late product deliveries and
there were no pre-shipments unlike last year.
On a currency-neutral basis, Footwear sales were down by 9.7% at €321.2
million ($410.9mm) Apparel sales fell by 5.3% to €208.6 million ($2.67mm).
Due to first time consolidations, Accessories sales improved significantly by
20.6% to €85.6 million ($109.6mm). On an actual basis, sales were down 2.7%
in Footwear, up 2.3% in Apparel and climbed 28.9% in Accessories.
By region, sales in the EMEA slid 7.2% to €267.6 million ($342.5mm) and were
down 10.7% on a currency-neutral basis. Sales in the Americas grew 26.1% to
€212.6 million ($272.1mm) and gained 15.4% on a currency-neutral basis. Asia
Pacific's sales were down 5.7% to €135.2 million ($173.1mm) and declined 17%
on a currency-neutral basis.
After the first six months, consolidated sales were down by 3.7%
currency-neutral but increased by 0.1% in reported terms to €1,298.5 million
($1.66bn). Sales in EMEA and Asia/Pacific were below last year's levels. Sales
in the Americas region, however, increased 12.7% currency-neutral despite of
the overall challenging market environment after both sub regions - North
America and Latin America - sustained their positive performances from the
first quarter. Footwear sales declined currency-neutral by 7.2% to €700.1
million ($896.1mm). Apparel sales decreased by 2.0% to €435.4 million
($557.3mm). Accessories sales, however, advanced by 8.9% to €163.1 million
($208.8mm).
In the second quarter, the gross profit margin improved by 30 basis points from
50.0% last year to 50.3%. This increase mainly results from a lower share of
closeout sales that more than offset negative impacts from currency hedging,
the regional mix and higher raw material costs. After the first six months,
PUMA's gross profit margin reached 51.3% after 51.1% last year. Footwear
reported 50.6% compared to 49.7% and Apparel 52.7% versus 52.3%. Accessories
declined to 50.7% from 54.9% last year, which is mainly due to the increase in
the scope of consolidation with the inclusion of Cobra Golf.
Rocky Brands sales up 7.9%
Rocky Brands,
Inc.reportednet sales for the second quarter endedJune
30increased 7.9% to $55.2 million versus net sales of $51.2 million in
the second quarter of 2009. The company reported net income of $500,000, versus
a net loss of $1.4 million, a year ago.
Excluding one-time charges of$600,000, net of
tax, associated with the early repayment of a portion of the company’s senior
term loan, second quarter 2010 net income improved to $1.1 million.
Mike Brooks, Chairman and Chief
Executive Officer, commented, “There were several highlights from the second
quarter, most notably the dramatic improvement in our bottom line. The
combination of sales growth, a 370 basis point improvement in wholesale gross
margin, and meaningful operating expense leverage, allowed us to recover from a
loss in the year ago period and deliver profitability that was well above plan.
We also made significant progress in improving our capital structure during the
second quarter. We paid off the majority of our high interest, senior term loan
using proceeds from our successful equity offering and availability under our
existing credit facility. As a result, we cut our debt level at the end of the
second quarter by more than half and will considerably reduce our interest
expense going forward. We are very pleased with the progress we have made
towards building a more efficient organization and we look forward to taking
advantage of our improved position to better capitalize on the growth
opportunities that are ahead.”
Net sales for the second
quarter increased 7.9% to $55.2 million compared to $51.2 million a year ago.
Wholesale sales for the second quarter increased to $38.5 million compared to
$37.9 million for the same period in 2009. Retail sales for the second quarter
were $11.0 million compared to $12.3 million for the same period last year.
The modest decline in retail sales was the result of
the ongoing transition to more Internet driven transactions and the decision to
remove a portion of our Lehigh mobile stores from operations to help lower
costs as discussed below. Military segment sales for the second quarter
increased to $5.7 million versus $900,000 for the same period in 2009.
Gross margin in the second
quarter of 2010 was $19.1 million, or 34.6% of sales compared to $17.7 million,
or 34.6% for the same period last year.
Wholesale gross margin was up
370 basis points driven by increased manufacturing efficiencies in the
Company’s factories. This was offset by lower retail gross margin as a result
of the ongoing transition to more Internet driven transactions and the increase
in sales to the Military which carry lower gross margin than the wholesale and
retail businesses.
Increased labor cost in
China impacting footwear firms
Few companies seem like they would be better insulated
from China’s labor shortage than American Sporting Goods.
The owner of the Avia, Ryka, And1 and Nevados footwear brands was one of the
first foreign companies allowed to operate a joint venture factory in China and
has been operating wholly-owned factories there for 12 years. Four years ago,
when it saw wages rising in Shanghai, it built a new factory in the landlocked
province of Jiangxi seven hours southeast where there was less competition for
labor.
ASG is struggling to fill jobs at its third factory in Jiangxi, which became
operational in January according to Jerry Turner, president of the Aliso Viejo,
California-based company. As of late July, the 500,000-square-foot plant was
operating at half capacity and Turner predicts it could be Christmas before the
factory is running full bore.
“It was not a panacea moving inland,” noted Turner in late July. “We are
running into the same problems we were running into in Shanghai or other
companies were encountering in Southern China. Even when you have workers, you
are faced with the turnover problem. Turnover may be 40 to 50%. It’s been that
way for the last four years. You’re constantly training workers. They reach a
skill level and they leave.”
Of all the challenges facing the U.S. sporting goods industry in 2010, one
would hardly think labor shortages in China would top the list but whether it
comes to making golf clubs, toning shoes or hiking boots, the topic is
dominating earnings calls and boardroom discussions across America.
The deep recession and a steep rebound in orders this spring have made it
difficult for Chinese factory owners to fill jobs. This whipsawing of the
industry has sporting goods companies – particularly in the apparel and
footwear business - headed toward longer lead times and late deliveries – the
exact opposite direction of what their dealers want.
As this article went to press, signs emerged that the labor shortage was
easing. Economic data released by the Chinese government in mid-July showed
delivery times steadied in June while backlogs declined, indicating Chinese
manufacturers were finally catching up on their order backlogs.
The country’s Purchasing Managers Index for input prices, while still rising,
has dropped dramatically since April, indicating the rate of inflation for
everything from labor to materials was slowing. The pace of expansion was
particularly pronounced in sporting goods, which was among the fastest
contracting industries in terms of what it was buying and producing.
Christopher Svezia, who follows active lifestyle brands for Susquehanna
Financial Group, thinks vendors have probably caught up on a rush of
replenishment orders that flooded in this spring. It’s not yet clear whether
they will be able to keep up during and after the December holidays.
“If this does not improve by back-to-school we will be in trouble,” Svezia
said. “Most companies will find ways to air freight deliveries, but there will
be some haggling on who pays for that.”
The causes of China’s seemingly sudden labor shortage were planted many years –
even decades ago – and most agree the era of cheap unlimited Chinese labor is
over. The reasons are many, but essentially boil down to the simple fact that
30 years of massive direct foreign investment and economic reform have
dramatically expanded economic opportunity for Chinese workers. Of course all
this means that average Chinese are earning higher incomes, yet even this good
news is causing headaches for U.S. brands.Many cut-and-sew plants, for
example, are now reserving capacity for their own brands.
“I see athletic shoe companies that were supplying us four years ago that have
5,000 stores,” noted Turner. “They’ve all gone their own way with their own
brands and are doing extremely well.The government has done a very good
job over the last 10 to 15 years improving the standard of living for people
there.”
U.S. brands have been bracing for this for years, but their dealers and
consumers have been largely insulated until now. That began changing this year
when dealers found it was much more difficult to replenish items in season or
find closeout merchandise. Supply will likely tighten further before the supply
chain finds its new equilibrium.
This spring, labor shortages stalled production at many foundries that make
golf clubs, delaying shipments by months, said Eric Yeh, president of
Chicago-based Infiniti Golf. At Wolverine World Wide, executives have warned
investors that rising costs in China will pinch margins even as overall profits
and sales rise. Some analysts recently lowered their 2011 earnings forecast for
Nike after the company acknowledged higher costs - including labor and freight
- were pressuring its gross profit margins.
A half-dozen sporting goods brands contacted for this article said their
Chinese manufacturers are demanding longer lead times so they can have enough
time to recruit and train workers. “The era of squeezing in rush orders is
over. In the golf business, lead times have gone from 70 days in some cases to
as much as a year at factories serving major brands, which tend to plan further
in advance. Dealers are responding by building up their safety stock for next
spring”, said Yeh.
Lead times at China’s tanneries have gone from 90 to 120 days and are now
moving toward 150, according to Josh Fairchilds, vice president of product
development and marketing at Oboz, the Bozeman, MT-based supplier of outdoor
footwear. Finding a container to ship finished product can extend lead times to
as much as six months. This forced Oboz to place orders for fall and winter
product in July, a full month before it had firm pre-season orders from its
largest retail partners.
“What it means for us is we have to look at new SKUs with a lot more of a
critical eye,” Fairchilds said. “It just adds one more layer of risk to
everything. I definitely count myself lucky to have a good relationship with my
factories.”
American Sporting Goods was encouraging its customers to place their orders for
January through March in July to avoid incurring expensive air freight charges,
which can add $7 to the cost of a pair of shoes. The company is redesigning
shoes to lower their labor content and shooting for fewer, longer production
runs. But at the end of the day, Turner said, there is no getting around the
higher costs.
Brands that can - are raising prices. Wolverine World Wide increased prices on
select brands in 2009 and again this year and expects more to come later this
year and next.
Large global brands with manufacturing expertise will likely partner with their
Chinese manufacturers to try and improve yields but this approach is unlikely
to yield relief any time soon. Automation will require a major cultural shift
and a better paid workforce.
“In the past, the response to any obstacle or difficulty that came up was to
throw more workers at it,” Yeh said of the country’s smaller manufacturers.
“They can’t do that anymore. Pretty soon they will have to raise their prices
because in order to attract a quality workforce they will have to pay better,
improve the working environment or reinvest in automation.”
Infiniti Golf opened a new office in Guangdong this summer to partner more
closely with the smaller factories it uses. “For me, to be 1 to 2 percent of a
large manufacturer’s business is risky,” said Yeh. “I’d rather be 10 percent of
a smaller manufacturer that way, when Infiniti needs in, he will really try to
help me out. That being said, there are a lot of smaller size manufacturers
that are here today and gone tomorrow.”
Yeh advises small brands to consider hiring a local agent to maintain a
permanent presence on the ground. Companies competing on price alone will
increasingly shift product to countries with lower labor costs.
Western sporting goods companies began shifting apparel work out of China in
2008, when the government enacted sweeping new labor laws. Mass merchants,
often with their Taiwanese logistics partners, have since moved some work to
lower-cost Bangladesh, Indonesia and India. Deckers Outdoor Corp. moved
production to northern China in 2008 to secure tax benefits and lower wages and
get away from wage pressures in the south. It is now scouting locations in
Vietnam.
But every country presents its own labor and infrastructure issues. Few have
the extensive supply chains and transportation infrastructure it took China 30
years to develop. Footwear makers note virtually all of Asia’s leather
tanneries are located in China. This prevents a wholesale shift out of
China for apparel, footwear, housewares and other low-tech manufacturers.
Indeed, from 2000 to 2008, when Chinese input costs and currency rose
substantially, the country’s share of the world’s manufactured exports grew
from 4.7 to 12.7 percent.
Vietnam is facing many of the same issues as China, according to Osprey Packs
Founder Mike Ptofenhauer, who lived in Vietnam for four years to oversee the
company’s manufacturing operations.
“The labor force in Vietnam is limited, and perhaps becoming less accessible to
the sort of low-tech manufacturing required by outdoor industry manufacturers,”
Ptofenhauer said. “The labor costs are continually rising along with the
competition for labor, particularly in the cut-and-sew industry.”
Ptofenhauer notes some sewing contractors have moved to the outskirts of the
city only to find that the traffic congestion is so bad that they can’t attract
labor.
Compounding problems of late has been a dearth of container ships, which ocean
freight carriers sidelined last year in a bid to boost rates amid
multibillion-dollar losses. Carriers have even slowed their freighters to save
fuel costs, further delaying shipments.
U.S. brands are coping by air freighting shipments – an unsustainable tactic
that is prompting some unpleasant discussions between U.S. brands and their
Chinese factories. This spring, one big-box retailer demanded a Chinese
manufacturer who missed a delivery date pay to air freight the shipment to the
United States. The manufacturer concluded it would be better off withholding
the shipment, but countered with an offer to pay ocean freight costs. The
retailer pulled their business and said they would find another vendor only to
return 90 days later to admit they were unable to find a vendor who could fulfill
their needs. The manufacturer agreed to take them back, but said it would be
unable to ship for eight months.
“That’s the situation,” said a source familiar with the situation. “Before, it
was clearly a buyer’s market.”
Yeh said brands will now have to partner more closely with their Chinese
factories.
“The retailer has to help too,” he noted. “They have to provide a forecast and
everybody has to share the risk. We are all in this together. I as a retailer
can squeeze vendors, but if I don’t get product, I don’t make money. In the
end, we all serve one master and that is the consumer.”
Decker’s has excellent
quarter
Deckers Outdoor Corporation results
released on July 2, prompted the owner of UGG, Teva and other outdoor footwear
brands to boost its earnings and sales guidance for the year.
Net sales increased 33.7% to
$137.1 million versus $102.5 million last year, while gross margin improved 450
basis points to 44.3% versus 39.8% a year ago.
"Our business continued to
perform very well during the second quarter with sales, margins and earnings
all coming in above plan," said Angel Martinez, President, Chief Executive
Officer and Chairman of the Board of Directors. "We were particularly
pleased with the pace of sales for the UGG brand overseas.
After a solid spring season, we
began shipping the fall line to distributors and we are confident that our
diversified product offering is gaining important traction in international
markets. At the same time, the strong momentum Teva experienced to start the
year carried forward into the second quarter, especially in our domestic
wholesale channel as the brand continues to benefit from a more complete
collection of open and closed toe footwear and improved shelf space.
The performance of our retail
stores was also very encouraging with the growing year round demand for the UGG
brand driving higher sell-through rates. We are excited with exceeding our
financial objectives for the first six months of the year, and as we pass the
half-way mark of 2010, we are confident we can continue to drive earnings
growth as our sales base increases."
- UGG Brand.Net sales for the second quarter
increased 34.6% to $100.2 million compared to $74.4 million for the same
period last year. The sales gain was primarily attributable to an increase
in global shipments of fall product versus the same period a year ago,
combined with solid sales of the spring line at company owned retail
stores.
- Teva Brand. Teva brand net sales increased 38.4%
to $31.2 million for the second quarter compared to $22.6 million for the
same period last year. The increase in sales was driven by higher reorders
of the expanded spring line of open and closed toe footwear in the second
quarter compared with the year ago period, as well as from the company
assuming control of direct distribution in the Benelux region.
- Other Brands. Combined net sales of the Company's
other brands were $5.6 million for both the second quarter of 2010 and
2009. eCommerce. Sales for the eCommerce business, which are included in
the brand sales numbers above, were $5.2 million for the second quarter of
2010 compared to $5.3 million for the same period last year.
- Retail Stores. Sales for the retail store
business, which are included in the brand sales numbers above, increased
63.1% to $10.0 million for the second quarter compared to $6.1 million for
the same period last year, driven by five new stores and a same store
sales increase of 19.2% for those stores that were open for the full three
month periods ended June 30, 2009 and 2010.
LaCrosse Footwear posts lower sales
LaCrosse Footwear, Inc.
reported net sales of $26.6 million for the second quarter ended June 26, 2010,
down 11% from $30.0 million in the second quarter of 2009. For the first half
of 2010, net sales were $60.8 million, up 9% from $55.9 million for the same
period of 2009.
For the second quarter of
2010, LaCrosse reported net sales of $26.6 million, down 11% from $30.0 million
in the second quarter of 2009. For the first half of 2010, net sales were $60.8
million, up 9% from $55.9 million for the same period of 2009. Net income was
$0.1 million in the second quarter of 2010, down from $1.7 million in the
second quarter of 2009.
For the first half of 2010,
net income was $1.8 million, up 83% from $1.0 million or the same period of
2009. Sales to the work market were $18.6 million for the second quarter of
2010, down 15% from $21.9 million for the same period of 2009. For the first
half of 2010, sales to the work market were $45.0 million, up 10% from $40.9
million for the same period of 2009.
The decrease in work sales in
the second quarter of 2010 was primarily due to the timing of U.S. government
orders. Sales to the outdoor market were $8.0 million for the second quarter of
2010, down 2% from $8.1 million for the same period in 2009.
The quarterly decrease in
outdoor sales reflects the impact of constraints on the supply of finished
goods caused by capacity limitations experienced by the company’s manufacturing
partners in China.
Limitations on the supply of
products especially impacted sales of certain key outdoor product styles as retailers
transition to product styles being launched in the second half of 2010. For the
first half of 2010, sales to the outdoor market were $15.8 million, up 5% from
$15.0 million for the same period in 2009.
The company continued to
maintain strong gross margins and strengthen its operations. Gross margin for
the second quarter of 2010 was 40.9% of net sales, comparable to the same
period of 2009. LaCrosse’s operating expenses were $10.7 million in the second
quarter 2010, up 4% from the second quarter 2009. The Company has continued
investing in its domestic sales, marketing and product development efforts.
The company significantly
reduced its inventory by $8.5 million or 24% from the second quarter of 2009,
reflecting execution of the planned transition to certain new products being
launched in the second half of 2010, as well as improved management of its
European inventories.
“While the timing of large
orders to various branches of the U.S. government adversely impacted our
business in the second quarter, we remain confident that our business
fundamentals are sound,” said Joseph P. Schneider, president and CEO of
LaCrosse Footwear, Inc. “We have continued to strengthen our customer
relationships throughout the government channel, penetrate further into a
variety of niche work markets and see our newest products being well received
by our customers.
Overall, we’re pleased with
our results for the first half of 2010 and are excited about our opportunities
for growth. “Moving into the second half of 2010, we’re focused on addressing
the industry-wide supply issues that impacted our first half sales. While we
can expect to see quarter-to-quarter fluctuations in future government channel
sales, the long-term trends in our government, wholesale, direct, and
international distribution channels look increasingly positive, along with
strong at-once demand from our wholesale channel partners and an improved
consumer spending environment. In preparation for future growth, we’re
continuing to enhance our operations, which include the recent opening of our
new factory store that showcases the outstanding legacy and quality of our
brands, and the upcoming move into our new domestic production facility.
That facility is expected to
significantly increase our manufacturing capacity and our ability to
efficiently meet growing worldwide demand for products reflecting our great
tradition of superior craftsmanship.”
Vietnamese footwear exports
up sharply
Vietnam is estimated to have
sold $2.75 billion from exporting footwear products in the seven months of
2010, rising 13.8% from a year earlier, the General Statistics Office (GSO)
said on July 26.
The country’s footwear exports
in July have risen 29.8% on-year despite a decrease of 2.69% against June at
$470 million.
Vietnam currently ranks the
fourth in the world’s top ten footwear exporters. The Southeast Asian country
targets to export $6.2 billion worth of footwear products this year.
The industry, however, is
facing numerous difficulties, particularly the lack of workers and the
dependence on imported materials.
Vietnam’s footwear exports are
also suffering from self-defense measures by the European Union, Peru and
Turkey.
The country is aiming to expand
its footwear exports to other markets like the U.S., ASEAN member nations and
its partners to take advantage of free trade areas set up between the bloc and
related sides.
Indonesia plans footwear
growth
Indonesia aims to become the second largest shoe hub
of the world, within two years, surpassing Vietnam. It will outshine Vietnam as
biggest footwear exporter of the world with estimated annual exports worth US
$2.1 billion.
The country that stands third in shoe production, following China and Vietnam,
can now produce over three million pairs of shoes, each year, of renowned
brands like Nike, Adidas, New Balance. Several famous shoe brands intend to
move their industries to Indonesia from Vietnam and China.
Two shoe producing companies of Korea would set up new plants in Indonesia
investing $150 million, and would also relocate their plants from Vietnam and
China. The two companies have so far produced shoes bearing Adidas and Geox
brands.
A new plant worth $100 million would be built on 20 hectares in Serang, west of
Jakarta by the famous shoe brand, ‘Adidas’, while, ‘Geox’ will establish its
new plant worth $50 million on 5.6 hectares of land in Pasuruan, East Java.
Adidas and Geox have production capacity of 850,000 and 1.2 million pairs of
shoes, respectively. Such relocation is also making textile and electronic
companies to shift their plants to Indonesia.
UPHOLSTERY
World Market at Las Vegas
The semi-annual furniture
market is taking place in Las Vegas as we go to press. Furniture today
interviewed a number of participants and produced the following stories.
The publication noted that despite
a sluggish economy that continues to frustrate retailers and manufacturers
alike, buyers were upbeat as they shopped the market on opening day.
Not surprisingly, exhibitors
said buyers shopped hard for market specials and other deals, but the vast
majority of them were optimistic about future trends. The optimism is evident,
exhibitors said, even though a significant improvement in business doesn't
appear to be imminent.
"We are looking for a good
market," said Ashley Chairman Ron Wanek. "Initial traffic may have
looked a little light, but it has since picked up and we are seeing all the
dealers we expected to see."
Wanek and other exhibitors -
especially those in Buildings B and C - said opening day traffic was light in
the morning but had picked up noticeably by lunch time.
Bedding showrooms were
particularly busy by afternoon, and most major upholstery, case goods and
occasional furniture resources also reported brisk afternoon traffic.
"Our core dealers are here
shopping in Vegas, and we expect to see our normal turnout of customers,"
said Bill Wittenberg, president of Klaussner.
"We had dealers in here on
Sunday and they were writing orders," added Gabriel Pu, vice president of
case goods and upholstery importer Acme Furniture. "We are off to a good
start"
"So far I am pleasantly
surprised," said Richard Olmeda, president and CEO of occasional and
accent furniture specialist Stein World. "People are absolutely writing
(orders.) They didn't come in to browse. They came in with a purpose."
That purpose, he said, is to
align themselves with sources that can provide them a combination of product
selection, value and quick delivery.
"The whole key is having
it in stock," said Chris Podschun, president of upholstery producer and
importer LaCrosse Furniture. "When you have a lot of selection and not a
lot of inventory, you have learned to navigate the new economy."
Podschun and others who import
said they continue to be plagued by shipping delays and significantly higher
freight prices for containers. The delays forced some exhibitors to scramble to
get samples set up in showrooms in time for Monday's opening.
Wittenberg said his company
anticipated the longer shipping times and was able to accelerate the delivery
of samples. "It was the right decision because in bedroom alone, we have
seven new collections that we're introducing here this week," he said.
Pu said just about all
retailers "were asking about container prices and shipping times."
"It means that $699 sofa
may now be $799, or that $399 recliner may now be $499 - just because of the
higher freight costs," said Bo Morrison, director of merchandising for
recliners and home theater seating at Berkline. "But in reality, shipping
costs are back to where they were about three years ago."
Heath Corso, marketing director
for first-time Las Vegas exhibitor Premier Furniture, said the leather
upholstery resource "had a good day" and is looking forward to
showing the new line to more buyers on Tuesday - which he believes will be the
company's busiest day at market."The reception has been good," Corso
said. "The lighter colors seem to be doing especially well."
The problems related
to Asia - from increased container prices to shipping delays - have some buyers
rethinking their merchandising strategies, looking for more domestic sources or
at least suppliers with strong domestic warehouse programs.
Houston-based Gallery
Furniture's buyers will be here "looking for a lot of furniture made in
America," said owner Jim McIngvale. He said he has had great success with
names like Jonathan Louis upholstery (made in California), Tempur-Pedic bedding
and Mayo, American Leather and United Leather - all made in Texas. Not all of
them show in Las Vegas, but McIngvale said he'll be here walking the aisles
looking for others.
Why the push for
American made goods? Three reasons, he said. "No. 1, it creates jobs in
this country. No. 2, it's easier to turn the inventory. You don't have to wait
(months). And No. 3, it's a great story," and one relevant to Gallery's
customers. "It's not that we don't carry Chinese furniture," he
said. "We just want to give them a choice."
Gallery will send
about 20 people to the market - in part for the educational seminars -
including several warehouse employees and one from accounting.
U.S. Furniture factory orders up in May
U.S. furniture factory orders
in May were up 10% from the same month a year earlier, the seventh month in a
row of positive comparisons, according to Smith Leonard.
"Admittedly, the results
were compared with very weak numbers in 2009, but these results seem to indicate
that 2009 appeared to be the bottom of the recession for our
participants," said Ken Smith, managing partner of the accounting and
consulting firm, which surveys residential furniture factories each month.
Orders for the first five
months of this year were running 10% ahead of last year, Smith Leonard said.
But the first five months of 2009 were down 21% from 2008, indicating the
industry hasn't fully rebounded.
Shipments in May were up 9%
from the same month last year and were up 6% for the year to date. Order
backlogs have grown sharply, and were up 40% in May from a year earlier.
The firm said 71% of the
participants in its factory survey are reporting increased orders year-to-date.
Pending home sales down
The pending sales index of
existing U.S. homes fell 2.6 percent to 75.7 in June, partly reflecting the end
of a federal tax credit for first-time buyers of up to $8,000. The temporary
tax credit originally expired June 30, but the federal government extended it
to Sept. 30 for buyers who had already signed a contract and were unable to
close the sale in time. Closings usually take a month or two after a contract
is signed, but the rush of buyers caused additional delays. The pending sales
index totaled 77.7 in May and 110.9 in April, when buyers sought to take
advantage of the tax credit. The index's current level is 18.6% below June
2009, when it stood at 93.0.
Chinese auto sales down
Auto sales growth in China, the world's
biggest market, weakened further in July, data showed Monday.
Sales rose 17.2% to 1.05 million, the
official Xinhua News Agency said, citing the cabinet's China Automotive
Technology and Research Center. That was down from the 19.4% growth reported in
June, and the report said August sales are likely to weaken further.
GARMENTS & ACESSORIES
Coach posts lower sales
Leather goods maker
Coach Inc (COH.N)
said shopper traffic to its full-line stores slowed during the fourth quarter,
raising concerns about its sales growth and sending shares down almost 4
percent.
While Chief Executive
Lew Frankfort said on a call that far more of the shoppers who did step into
Coach stores made purchases, helping to boost sales, the lower traffic trend
raised concerns on Wall Street about Coach's ability to meet its sales targets.
"You don't want
to hear them say that traffic is falling, especially at the start of the fall
season," said Brian Sozzi, an analyst with Wall Street Strategies.
Frankfort's remarks
overshadowed better-than-expected fourth-quarter results, boosted by strong
demand for its less expensive Poppy handbag line and rapid growth in China.
In an earlier
statement, Frankfort said he was confident Coach's sales and profits could
continue to rise at a double-digit pace, aided by expansion in places such as
Western Europe and China, where Coach is just entering the market.
But that expansion,
coupled with higher leather costs, could eat away at Coach's profit margins,
Sozzi said.
"They basically
told the market they won't be able to beat year-over-year comparisons," he
said. Coach also reported shipments in its wholesale business to U.S.
department stores were flat during the quarter, compared with a year earlier.
But Frankfort told Reuters it was better to risk losing sales than start the
discounting many department stores were engaging in. "We have been
reluctant to be promotional," he said in an interview.
Net income for the
fourth quarter, which ended July 3, rose 34.1 percent to $195.5 million, , from
$145.8 million, a year earlier.
Coach said sales rose
to $950.5 million in its fourth quarter, while analysts had forecast sales of
$888.87 million. The period included an extra week, without which Coach said
sales would have been up 13 percent, and earnings per share would have been 23
percent higher at about 56 cents.
Sales at North
American stores open at least a year rose 6.3 percent during the quarter.
Frankfort said that a
strategy to entice shoppers with an extensive line of entry-priced products and
to expand its outlets had driven sales in North America, which makes up the
bulk of the business.
While China now
accounts for about 3 percent of Coach's sales, Frankfort said that by
mid-decade, that could rise to 10 percent, or about $500 million.
"It (China) has
the opportunity within a few years to play a much more significant role,"
Frankfort told Reuters.
For the fiscal year
that just ended, retail sales in China doubled. Coach has 41 stores in China as
of July 3, and has plans to open another 30 locations there this fiscal year.
Coach also plans to
build up its men's business, particularly in Japan and the United States.
Sales to men account for about 4 percent of overall sales and could reach 10
percent within a few years, Frankfort said.
Coach's gross margins
rose 2.9 percentage points to 73.3 percent, partly due to lower leather prices.
Frankfort said he expects the costs of raw materials to edge higher this year.
Coach operates 342
retail stores and 121 factory outlets in North America.
LCMH Moet/Vuiton
profits jump
French luxury goods
behemoth LVMH Moet Hennessy Louis Vuitton Tuesday reported a 53% jump in first
half net profit, heralding a strong return of high-end consumption and, in a
departure from cautiousness seen in previous quarters, expressed confidence in
the rest of the year.
The world's largest
luxury goods company, which owns Krug champagne and shoe-maker Berluti, posted
net profit for the first six months of €1.05 billion (US$1.36 billion), up from
€687 million a year ago as all divisions posted double-digit revenue growth.
In a sign the company
plans to solidify its position as the industry's largest player, LVMH
executives pledged to employ marketing efforts and invest in fast-growing
markets like China to make market share gains.
"In the current
recovery from the economic crisis, LVMH will continue to gain market
share," the company said in its statement.
Revenue for the six
months to June 30 was €9.1 billion, up 17% from €7.8 billion a year earlier and
ahead of analyst expectations of €8.85 billion. All divisions, from perfume to
wine posted double digit sales growth with the highest increase coming from watches
and jewelry, up 28% to €443 million.
LVMH said there was a
strong recovery in orders. The business was one of the hardest hit in the
sector as retailers dramatically cut back on orders during the crisis,
preferring to draw down stocks before buying new products.
The fashion and
leather goods division, which houses the company's star brand and one of the
industry's strongest performers throughout the crisis, the leather goods maker
Louis Vuitton, posted 18% growth to €3.52 billion. Luxury consumers took refuge
in more classic leather accessories during the economic downturn, preferring
staid brands to the trendy handbags of the boom years.
Pakistan garment exports
sharply lower
Leather garments of Pakistan showed export plunge
during last fiscal registering a fall of 10.31 percent. These exports reduced
to $860.244 million last fiscal from $959.146 million during previous fiscal.
While in fiscal 2007-08, leather exports of the country accounted to $1.25
billion, which has been witnessing a falling trend, due to shoddier economic
conditions of the country and the impact of war.
Only raw leather exports from the country registered positive growth of 12.57
percent in the fiscal 2009-10. It increased up to $337.145 million from
$299.494 million during the previous fiscal. However, unit price of raw leather
slipped to $14.17 per square metres from $15.33, as per the Federal Bureau of
Statistic’s provisional figures.
Increased demand from China, India and Vietnam for shoe manufacturing swelled
up the exports of raw leather, including, wetblue and wet split. The country
largely exports gloves used in industries. But industries in the West shrunk
imports of industrial gloves on account of massive layoffs taking place due to
economic slump.
Exports of leather gloves stood at $96.081 million last year, recording a 15.74
percent decline over previous year’s exports worth $152.258 million. Several
gloves and garment units in Lahore, Sailkot and Kasur pulled downed their
shutters due to less demand. Exports of leather apparel and clothing items
plummeted to $343.333 million last year by 10.71 percent from $102.884 million
in the previous year.
Moreover, leather footwear exports fell down to $70.468 million last year from
$102.884 million in the previous year, recording negative growth of 6.34
percent. However, miscellaneous leather products’ shipment witnessed 10.38
percent hike from $11.974 million during 2008-09 to $13.217 million during the
fiscal 2009-10.
RAW MATERIALS
Prices were generally steady
since our last report. This is the case for North America, Europe and Latin
America.
Click on chart to view underlying data.
Wet blue, whole
hides, machine flayed, full substance, average 48/52 ft, average 23 kg
Selection TR1 at
around $ 1.22-1.25/ft CFR.
Selection TR2 at
around $ 1.08-1.12/ft CFR.
Upholstery crust leather
fo in substance 0.9/1.1 mm, in sizes varying from 48 to 56 ft:
$ 1.22-1.25/ft CFR
for selection TR1
$ 1.12-1.15/ft CFR
for selection TR2
The automotive
upholstery leather, in substances 1.1/1.3 to 1.2/1.4 mm, stucco and buffed, at:
$ 1.30-1.35/ft CFR
for selection TR1 (Asking price)
$ 1.20-1.25/ft CFR
for selection TR2 (Asking price)
Prices in Argentina
Click on chart to view underlying data.
Crust leather for
automotive upholstery, in substance 1.1/1.3 to 1.2/1.4 mm, has been sold at
levels like:
$ 1.35-1.45/ft CFR
for material that can either be stucco and buffed for the most requiring
customers, but usually sold for full grain type of leather.
Upholstery crust
leather, we can find prices from $ 1.15 up to 1.50/ft CFR,
For shoes, in
substance 1.2/1.4 mm, natural/not dyed, prices have been:
TR1 - $ 2.20/ft CFR
TR2 - $ 1.80
TR3 - $ 1.40-1.50
LOOKING AHEAD
Looking far further ahead
than usual, many of the above stories in this weeks footwear section talk about
a shift away from manufacturing and even tanning in China. As their economy
improves, and the population enjoys ever higher standards of living, the home
of cheap labor is getting more expensive each year.
This is no secret and is why
many firms involved in making leather products as well as a myriad of other
goods are beginning the shift to other low cost countries. Few will argue that
China has seen its best days of being the manufacturer for the world.
On the plus side however,
this same population that is enjoying growing affluence is also becoming a
larger consumer of leather products.
In our view, the day will
come in the not too distant future, where a sizeable percentage of leather
products will be made elsewhere and then exported to Chinese consumers.
Leather Table| Shoe Upper Leather | This Week | Last Week |
| Full Grain aniline, cowhide 2.0 mm and down | 2.45-2.50 | 2.45-2.50 |
| Full Grain aniline, cowhide 2.0/2.4 mm | 2.45-2.50 | 2.45-2.50 |
| Full Grain aniline, cowhide 2.4 mm and up | 2.45-2.50 | 2.45-2.50 |
| Corrected leather, cowhide 2.0 mm and down | 1.70-1.80 | 1.70-1.80 |
| Corrected leather, cowhide 2.0/2.4 mm | 1.70-1.80 | 1.70-1.80 |
| Corrected leather, cowhide 2.4 mm and up | 1.70-1.80 | 1.70-1.80 |
| Upholstery Leather | This Week | Last Week |
| Full Grain aniline, cowhide 1.0/1.4 mm | 2.80 | 2.80 |
| Full Grain aniline, cowhide 1.4 mm and up | 3.20 | 3.20 |
| Corrected leather, cowhide 1.0/1.4 mm | 2.60 | 2.60 |
| Corrected leather, cowhide 1.4 mm and up | 3.01 | 3.01 |
| Split Leather | This Week | Last Week |
| Embossed, smooth 1.4/1.6 mm | .90-.95 | .90-.95 |
| Embossed haircell 1.4/1.6 mm | .90-.95 | .90-.95 |
