Fashion brands stock level surges, dents profitability - report
We've heard a lot lately about how fashion retailers and brands are facing a stock crisis with warehouses full and brands having to resort to deeper than usual discounts to free up some space. But so far, the focus has been on the biggest names and we've not had any numbers put on the wider volumes of stock being held. That’s now changed, however.
A new study of multiple industries shows that clothing and fashion manufacturers saw the seventh biggest increase in stock on hand levels of any sector when comparing Q3 stock levels in 2022 against the same period in 2019. The volume is up 57% on pre-pandemic levels.
The analysis is the work of Unleashed, a New Zealand cloud-based production, inventory and sales software specialist that’s owned by the UK’s Access Group. It looked at anonymised data from thousands of SMEs that use Unleashed in the UK, Australia and New Zealand over 12 consecutive quarters from 2019 up to Q3 2022.
And one outcome is that when looking at gross gross margin return on inventory (GMROI), for fashion it’s down 81.8%, the highest out of all industries featured in the research.
“It’s clear that clothing manufacturers are feeling the impact of holding more stock, with the majority of firms seeing a drop in overall profitability when looking at this metric specifically,” Unleashed said.
As we’ve previously reported, supply chain issues have eased a little and this has added to the problem with retailers and brands still holding stock that was delivered late, but also now receiving deliveries they didn't expect to have to deal with just yet.
Not only that, but companies are more efficient now than a few years ago and the report said that when it comes to fulfilment times, clothing firms have been able to make a cut compared to pre-pandemic levels (down 27.8%).
Meanwhile manufacturers are paying 10.24% more for their goods now compared to the start of 2022.
“What started as a supply chain crisis appears to have evolved into an inventory crisis at the individual business level,” said Unleashed CEO Gareth Berry. “Yes we've seen shipping times and prices ease, but that’s at the expense of firms who are forced to hold far more stock just to stay operational. It’s a tough situation for fashion and clothing manufacturers that will present real cash flow pressures. Managing those stock levels down in the coming months will be a delicate task.”
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