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The trend of differentiation in textile and apparel performance is clearly more powerful
In 2010, the textile and apparel industry experienced a strong rebound in performance driven by increased demand and an improved operating environment. While overall growth remained robust, a growing divergence in company performances became evident, largely due to differences in cost management and pricing power.
By February 24, four listed companies in the Sichuan-Wuhan textile sector released their 2010 annual reports, all showing positive net profit growth for shareholders. Among 11 companies that issued performance updates, only four saw slight declines, while 42 out of 48 forecasted companies were optimistic—demonstrating a clear trend toward positive outcomes.
The overall performance of the textile and apparel industry last year was steady, supported by a recovery in both domestic and international markets. With rising export demand and stronger domestic consumption, the industry benefited from a favorable business climate. This positive momentum is expected to continue for some time.
However, performance gaps among companies have become more pronounced. The primary factors behind this differentiation are rising production costs and the varying ability of firms to pass these costs on to consumers. Companies with strong cost control and pricing power have managed to maintain or even improve their profit margins, while others have struggled.
For example, Huamao (000850) reported total revenue of 1.956 billion yuan, up 23.73% year-on-year, and net profit surged nearly fourfold to 360 million yuan, partly due to investment income and government subsidies of 320 million yuan. Similarly, Tianshan Textile (000813) turned a profit, with most of its earnings coming from government support rather than core operations.
Rising cotton prices, along with higher labor costs, squeezed profit margins for many companies. Jin Feida (002239), for instance, saw a 63% drop in net profit despite a modest increase in revenue. The company attributed this to rising production costs and stable foreign market prices, compounded by the impact of currency appreciation.
On the other hand, leading brands like Vosges (002083), Fu Anna (002327), Luolai Home Textiles (002293), and Mengjie Home Textiles (002397) managed to boost profits through strategic price increases and expanded market presence. These companies focused on improving their market structure, exploring new sales channels, and adjusting pricing strategies across domestic and international markets.
Industry experts predict that 2011 will see continued growth in market demand, but competition and low gross margins will persist. Rising raw material and labor costs will further intensify performance disparities among textile and apparel companies.
As of February 24, China’s cotton price index (level 328) reached 30,365 yuan per ton, with new station prices hitting 30,000 yuan—up over 10% from the start of the year. This cost pressure is being passed down the supply chain, affecting weaving, dyeing, and garment production.
Analyst Wang Qiang from China’s first textile network believes the rising cotton prices will accelerate industry consolidation. Large enterprises with strong bargaining power and sufficient raw material reserves will be less affected, while smaller firms face greater challenges. This process will drive resources toward high-value-added companies, enhancing their market share and profitability.
Leading brands with strong brand recognition, distribution networks, and product appeal are well-positioned to capture more market share, sustain growth, and benefit from increasing gross margins. As consumer preferences shift toward fashion, comfort, and sustainability, domestic clothing brands are expected to grow rapidly during the 12th Five-Year Plan period, with industry leaders in accessories also seeing promising prospects.