Orders are beginning to trickle into Sri Lanka’s apparel export firms as Coronavirus lockdowns are eased in the West and buyers re-activating some cancelled orders as stores opened, industry officials said.
“Overall, what I hear from other factories is that the reaction on sales is slightly better than predicted at the initially stage of COVID19,” Rehan Lakhany, Sri Lanka Apparel Exporters Association President told EconomyNext.
“People over-reacted and actually cancelled way more than they should because there was uncertainty at that time therefore the impact is slightly lesser than anticipated”.
Sri Lanka’s apparel industry was expecting to lose 1.5 billion US dollars’ worth of revenue between March to June.
The industry earned export revenues of 5.5 billion US dollars out of 11 billion US dollars of merchandise exports in 2020.
“..[H]aving said that the apparels manufacturers are not running at full capacity,” Lakhany said. ‘They are still running at losses.
“Industry is picking up slowly, it is not anywhere close to normal but slightly better than originally anticipated.
Production was completely stopped from mid-March and from the first of May, the apparel industry has started production.
Since the apparel industry works on long calendars, the manufacturers produce garments six to four months ahead of entering retail stores, therefore when COVID-19 seeped to the European markets in March.
Lakhany said a lot of factories had their orders canceled while still running in their production whereas many customer have said to stop production.
He said it was too early to give an estimation of the exports at the moment which mostly consists of personal protective equipment like masks.
“Shipment, to be honest, has been insignificant, generally we take about at least a month to produce the garment we are going to start preparing exports only now,” Lakhany said.
“Even though production started by the first week of May, exports for fashion and normal will only start by the first week of June however there were small shipments of PPE.”
Hasitha Premarathne Group Finance Director of Brandix who also heads the firm’s India operations said PPE orders are expected to drop from around the third quarter.
But consumers in Western markets are cautiously beginning to shop with easing lockdowns. Though numbers are relatively small, window shoppers are browsers are also less.
“The footfalls to retailers are about 30 percent of the pre-COVID levels, but many are serious buyers, so the sales volumes are comparatively higher,” Premarathe said.
“But there are challenges like fit-on and returning items which have to be solved. There is also an increase in online sales.
But with only a small volume of orders, the struggling industry is still unable to support the pre-crisis workforce.
The industry says it directly employs around 400,000 workers and there are another two million indirect beneficiaries.
Lakhany said some factories are looking at laying off because it may take up to an year for the business to come back to pre-COVID levels.
“Downsizing, rightsizing will have to happen, re-structuring of companies will have to happen”, Lakhany said.
“Some factories have already started on voluntary schemes however some are busier than the usual days because of the production of mask and PPEs but even those factories are anticipating a downturn from July onwards.”
“Mask productions are there only up to end July, beyond that they will get back to their regular production and that’s where they will start seeing the drop,” Lakhany said.
The industry is also struggling with import controls slammed recently which had created supply chain bottlenecks making it difficult to full-fill some orders.
Sri Lanka has slammed import controls in the style of an economic embargo, as the rupee came under pressure due to money printing and the lack of a credible anchor for monetary policy.