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Walmart crisis hitting Bangladesh apparel sector

US retail giant Walmart is radically reducing the cost of its apparel items or canceling apparel orders in an attempt to sell off its leftover as shoppers shift their focus toward food amidst the rising inflation. As a result, one of Walmart’s main readymade garment (RMG) sourcing countries – Bangladesh is seeing work orders worth billions of dollars canceled.

Walmart crisis hitting global apparel
Figure: “The increasing levels of food and fuel inflation are affecting how customers spend,” Walmart’s Chief Executive, Doug McMillon, said. Courtesy: Matt Rourke/Associated Press

Walmart’s executives said the retailing giant has emptied most of its summer collections ahead of the back-to-school season – which has started in big parts of the South – and the forthcoming holiday period, reports FreightWaves.

Bangladeshi RMG leaders opined that they have witnessed that Walmart has been dipping its apparel orders in terms of both number and volume in garment factories for the last couple of weeks.

Textile millers who are providing fabrics for Walmart say that they also facing a scarcity of orders. While a Bangladesh Garment Manufacturers and Exporters Association (BGMEA) leader said to media that Walmart had already annulled some orders. And it also suspended shipments of some orders ready for delivery and paused those in process.

Meanwhile, the cost of garment production has increased by at least 20 percent due to the abnormal increase in fuel oil prices. Garment factory owners are unable to find ways to cope with the increased costs.

The factory owners say that the prices of garments currently in production are fixed at least two months in advance. The agreement was made according to the situation at that time. But in the meantime, the cost has increased due to the sudden increase in the price of fuel oil. There is no opportunity to propose a new price increase in the production stage. As a result, they have to produce clothes at a loss.

Walmart said the shoppers are focusing on essentials like food and gasoline due to skyrocketing inflation and high gas prices. The announcement comes after the company announced reduced profit projections for fiscal year 2023.

“The increasing levels of food and fuel inflation are affecting how customers spend, and while we’ve made good progress clearing hardline categories, apparel in Walmart U.S. is requiring more markdown dollars,” Walmart CEO Doug McMillon said in a statement.

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