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High street fashion retailers face mounting stock piles in warehouse

Warehouses run by high-street fashion retailers are stuck with unsold stock due to the ongoing global economic crisis, one of the reasons for which record high inflation has cut the consumers’ purchasing capacity in many countries. Apparel brands have left huge stocks of clothes in their warehouses, prompting manufacturers to reduce production or delay shipments.

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Figure: Warehouses run by high-street fashion retailers are stuck with unsold stock due to the ongoing global economic crisis.

A report in the Sunday Times suggested that warehouses serving several high-street fashion chains are stuck with unsold stock, easing pressure on supply chains and consumers becoming more cautious when it comes to spending.

Garment manufacturers in Bangladesh are also getting affected. Buyers are deferring shipments and nearly $1 billion in clothes and fabrics are stuck in warehouses. Manufacturers are facing a crisis due to shortages of Bonded warehouses.

The crisis comes at a time when readymade garment manufacturers, after a steep decline in the last three months, have again started getting a good number of work orders. They are facing problems to keep new clothes and products in their warehouse as old products have already occupied most of the space.

According to Sunday Times, brands including M&S, Next and Asos have indicated that they are exploring ways to clear excess inventory, including delaying deliveries to suppliers.

M&S has asked suppliers to halt supplies to warehouses and has delayed finalizing orders for next year. M&S said inventory levels in two weeks ago were in line with seasonal plans and, like many sectors, lead times were normalizing post-Covid and it had to readjust stock flows.

NEXT, which makes 41% of its online sales to third-party brands, has returned stock to brands to free up space. The retailer said it had only returned a “very small” amount it did not own and that inventory was at planned levels.

Asos is sitting on just over GBP 1bn of unsold stock, a 34% increase from the previous year. Earlier this month Asos confirmed it had entered a restructuring phase which will see a review of various job roles across the business.

Late in the last month, Asos warned it would look to cut costs across the business after posting a full-year loss and reporting a slowdown in sales growth. Asos swung to a pre-tax loss of GBP 31.9m (US$36m) from earnings of GBP 177.1m a year ago. Sales were up just 1% to GBP 3.94bn.

Orders are also said to have been delayed after apparel suppliers at Tesco were reminded of their stock-holding policy, although a source close to the company denied this was linked to overstocking.

The news comes after Black Friday sales surged on November 26. With many retailers starting their sales early, transaction volumes also increased by 3.46% in the week leading up to the event.

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