According to Yuanta Securities Investment Consulting Co, which recently stated in a research note that clients are expected to resume orders after reaching healthier inventory levels, Taiwan’s apparel and footwear firms may face extended inventory adjustments due to weak sales and record in-transit inventories reported by their global clients in the second quarter (Q2) this year. Meanwhile, Yuanta predicted that local suppliers will “experience a return of earnings reductions and share price corrections, as observed in the 2016-2017 inventory adjustments period.”
According to the investment firm, a two to three-quarter inventory adjustment period is expected, which will have a negative impact on Taiwanese domestic manufacturers’ sales and profitability in the following quarters. “Brand client inventories are determined by existing brand inventory levels and sales projections.” According to the consultancy’s note, the cautionary comment followed excessive supplies on the upstream side and disappointing sales on the downstream side in the first half of this year by the footwear and clothing business. Shipments are clogging transit inventories, while their clients in the United States and the European Union have restricted products on their shelves due to logistics problems, according to the company. Yuanta anticipates that Nike will contribute up to 90% of sales to Feng Tay Enterprises Co.
