Textile And Apparel: 1-2 Month Zero Sharp Drop In Consumer Spending Initiatives Are Expected To Stimulate Demand Growth

Recent hot spots: a number of measures to promote consumption are expected to stimulate domestic demand growth

Recently, the government has launched a consumption promotion policy to ease the impact of the new crown epidemic and stimulate domestic demand growth. In terms of the clothing industry, we believe that the policy is expected to bring incremental market to the brand clothing (sink market and new consumption mode), promote the upgrading of clothing consumption (stabilize and increase residents' property income), and at the same time, the leading clothing brand can benefit from the encouragement policy of the state to the independent brand, so as to achieve the improvement of the market share. In addition, the epidemic has enhanced the attention of the state and residents to sports health, or will stimulate the growth of sports clothing consumption demand.

At the same time, governments and some enterprises are issuing consumer vouchers directly to residents and tourists to stimulate short-term demand growth. From a historical perspective, consumer coupons can ignite residents' enthusiasm for consumption and have amplification effect. As far as clothing is concerned, some coupons targeting fitness are also expected to boost the demand for sports apparel. At the same time, driven by factors such as residents' resumption of travel and seasonal changes after the outbreak, clothing demand is expected to rebound.

Industry data & Information:

Brand clothing: the epidemic caused a sharp decline in the 1-2 month zero growth rate, and the high-end brand performed better than the industry.

In the 1-2 month, the total retail sales of consumer goods increased by -20.5% (-28.5PCTs) over the same period, of which the retail sales of textile and clothing categories were -30.9% year-on-year, and the growth rate was -32.8/-32.7PCTs / year-on-year respectively, of which the retail sales volume of clothing sales above the limit of -33.2% was faster than that of -33.9PCTs. On line (Tmall & Taobao), online retail sales of physical goods wearing -18.1% year-on-year, the growth rate is -33.5PCTs, or due to the weakening of terminal demand and the obstruction of logistics across the country due to the impact of the epidemic. And the leading company is obviously better than the industry, or because the leading company's supply chain is more efficient, and the multi choice high starting rate logistics is at the same time, at the same time, carry out moderate promotion, mail delivery activities, and enhance attractiveness. In addition, we found that in the February, the most high-end brands in China were affected by the most serious epidemic (25% or more), which is generally better than the popular brand (generally declining 50-80%). We believe that the contribution of VIP is mainly due to the high and middle end brands. Therefore, it pays more attention to the daily member management and the stickiness of the members. Therefore, when brands are sold through various online ways, the high-end brands will be more likely to drain the original cable customers to the line, and the conversion rate will be higher.

Textile manufacturing: insufficient demand leads to continuous downward price of domestic and foreign cotton. USDA expects supply and demand gap to narrow.

Price situation: as of March 21, 2020, the cotton 328 price index closed at 11825 yuan / ton, the unit price ring / / year-on-year change of -1646/-3782 yuan; Cotlook A price index closed at 66.6 cents / pound, ring / / change of -10.9/-18.1 cents. We believe that both domestic and foreign cotton prices are down, mainly due to the low overall recovery rate of domestic textile enterprises and the lack of terminal consumption.

Supply and demand and inventory situation: in March, USDA expects that the gap between domestic supply and demand in 2019/20 is expected to be -16.3 to 257 thousand tons (compared with 237 thousand tons in February) compared with the expected value in February, mainly considering the impact of the new crown epidemic on market demand. Domestic consumption and imports are expected to be cut from 21.8/5.5 to 794.7/179.6 million tons respectively, and the final inventory will increase by 163 thousand tons to 7 million 510 thousand tons.

Industry viewpoint and investment suggestion: after considering the improvement of residents' fitness consciousness after the outbreak, and the State encourages nationwide fitness, it is expected that the demand for sports shoes and clothing is expected to improve. It is recommended to pay attention to the brand layout of all brands, the Anta sports, which is expected to be stronger and stronger, and the sustainable development of the terminal management efficiency. Channel upgrade and underestimate the value of high-end high-end clothing down Bosideng.

Risk warning: the risk of macro-economic growth is slowing; terminal consumer demand is slowing down, or sales of brand clothing are lower than expected; and cotton price risk is different.