In the face of reduced consumer demand, a number of retailers, including Walmart, have already canceled some orders
Bangladesh’s apparel exports registered a 58% year-on-year growth to over $2.5 billion in the first 22 days of August – at a time when the sector’s major export destinations are experiencing record inflation owing to the ongoing war between Russia and Ukraine.
In the face of reduced consumer demand, a number of retailers, including Walmart, have already cancelled some orders. Besides, some buyers are requesting exporters to delay shipments or suspend orders ready for delivery.
The sector enjoyed a whopping 446% growth year-on-year in a single day during the period, but the shipments also witnessed a negative growth of 54% in a day, said sources at the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
The BGMEA came up with the calculation based on data from the National Board of Revenue as the Export Promotion Bureau is yet to make the official announcement.
Talking to The Business Standard, BGMEA President Faruque Hassan said, “Hopefully, August will end with positive growth but September and October may see a negative trend.”
Earlier, the BGMEA president predicted that the sector would post a double-digit growth till August compared to the same period last year.
Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said the situation will be worse in the coming months as almost every buyer is suspending orders from this month.
He further explained, “My factory was full of orders till December this year. But about 40% of the orders for August and 30% for September got halted due to the global economic slowdown.”
Industry leaders say most factories are bracing for around 30% shortage of work orders in the coming months.
They fear that if the global economy does not recover soon from the economic slowdown caused by the ongoing war between Russia and Ukraine, apparel exports may fail to achieve the last fiscal year’s record receipts amounting to $42.2 billion. The government has set a target to earn $46 billion through RMG exports in FY23.
Bangladesh’s major export destinations – the United States and European countries – are now facing a 40-year high inflation.
For the first time, exports to a single country – the USA – are crossing $10 billion. Of this $10 billion, $9 billion came from the RMG sector in FY22, according to the EPB.
Walmart, one of the major USA buyers of Bangladesh’s readymade garments, officially announced that they will procure 30% less for the spring season as they have huge unsold inventory.
Walmart has cancelled billions of dollars in orders as part of a continued effort to align inventory levels and pursue the demands of budget-conscious consumers.
The company executives said the US retailer has cleared out most of its summer collections ahead of the back-to-school season – which has begun in large parts of the South – and the upcoming holiday period.
Spring season apparels are scheduled to be produced in September-December, Sparrow group Managing director Shovon Islam said, adding that other buyers, including H&M, Inditex, American Eagle, are also placing less volume of orders as their stores saw less demand for apparels.
Kutubuddin Ahmed, chairman of Envoy Textiles Limited, the world’s first LEED platinum certified denim textile facility, said, “We have observed that Walmart has been reducing its orders in terms of both number and volume in garment factories for the last few weeks.”
The textile millers, which are supplying fabrics for that brand, also face a shortage of orders, he added.
BGMEA Vice-President Rakibul Alam Chowdhury said the industry is suffering as the American multinational retailer Walmart and Target had already cancelled some orders.
They also requested suspending shipments of some orders ready for delivery, he added.
Rakibul Alam said although none of the factory owners informed BGMEA about order cancellations, the organisation contacted its member factories on its own.
Member factories have been asked to formally report the order cancellations to the association, he added.
