Brooks Brothers, Lacoste Supplier Sees 40% Drop in 2021 Sales
(Bloomberg) -- TAL Apparel Ltd., the biggest supplier to Brooks Brothers Group Inc., projects a plunge in sales will carry through to next year, signaling that retail pain will continue and likely trigger more bankruptcies in the sector.
The Hong Kong-based garments firm, which makes one of every six men’s shirts sold in the U.S., expects sales to plunge 40% in 2021 from pre-pandemic levels after dropping 50% from April to December, according to TAL Group Chief Executive Officer Roger Lee. As recovery looks further and further away, the company has pivoted away into manufacturing high-end washable masks.
“In July, we would have expected to see an increase in orders for the winter season -- we still have not seen anything,” Lee said in an interview Tuesday, adding that more retailers will follow after Brooks Brothers filed for bankruptcy this month. “The brands that we work with really are not optimistic.”
The coronavirus pandemic, which has afflicted over 16 million people and killed more than 660,000, has unleashed a global economic catastrophe by whittling down corporate revenues and triggering job cuts. It has also upended every aspect of modern life by forcing people to stay indoors, shun socializing and cancel travel plans, wrecking sectors ranging from tourism to hospitality and retail.
In March, when the coronavirus outbreak had just started going global, Lee hoped TAL’s garment orders would pick up in the winter and fully recover to pre-pandemic levels by April next year. But the continuing outbreak in the U.S. and resurgences across the world from Spain to Hong Kong have diluted those hopes.
“The biggest damage is definitely long term,” said Lee. “The U.S. economy has lost so many jobs. We can’t produce because people don’t want to buy.”
TAL’s apparel business, which employs more than 20,000 at factories in Vietnam, China, Thailand and Ethiopia, is planning to cut capacity to cope. Before the crisis, it had an annual production capacity of 55 million pieces of clothing.
The supplier is permanently shutting its Malaysian plants, which will reduce its workforce by about 5,000 workers and its capacity by a fifth.
The only bright spot is that China consumer demand is getting back up to pre-pandemic levels, Lee said. “Everywhere else globally is still very weak.”
To cushion the blow from other countries, TAL has shifted to the personal protective gear market. It has sold more than 50 million washable masks and is now planning to roll out its own branded masks.
“The challenge now for everyone is how to manage the business when you cannot predict the future,” said Lee.
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