Defying the Downturn: UK Clothing Suppliers Buck Recession Trend with 2.7% Profit Surge
The Manufacturer Health Index revealed that small and medium-sized apparel, footwear and accessories manufacturers saw a 2.7% increase in profitability and a 7% increase in sales in the current fiscal year ending in the second quarter of 2024.
UK apparel manufacturing performed well compared to other manufacturing sectors in Q2 2024, according to the Manufacturers Health Index.
The index, published quarterly by inventory management software provider Unleashed, suggested that clothing, footwear and accessories makers were the exception with profit margins of 2.7%, with beverages seeing the biggest decline of almost 30%, and sports, down 24%.
Across manufacturing, profitability fell by an average of 9.16% despite sales rising by 9.18%, but the index noted that some sectors were “holding up stronger”.
UK manufacturing quarterly sales plummet
Unleased also revealed that its sales performance in the UK fell sharply in the quarter, with total revenue down 1% in Q2 2024, compared to an overall upward trend compared to Q2 2024.
Credit: Unleashed Manufacturers’ Health Index
The clothing and footwear sector was the only manufacturing sector to see a 5% increase in revenue in Q2 2024.
Struggling to beat inflation, passing costs on to customers
James Bennett, who serves as fractional chief financial officer for several product businesses, said the inflationary effect of raw materials should not be underestimated and there was resistance to passing on the full cost of inflation to consumers.
Bennett said: “My clients are concerned about losing business and the revenue that comes with it. A common discussion is how high can prices be raised? If a product is targeted at the upper end of the market, will consumers be more or less affected by the cost of living? Cycling shoe brands make premium products targeted at avid riders. Therefore, cycling shoes are classified as a discretionary product, but in reality they are not behaving like a discretionary product and sales have been strong so far this year.
“They have avoided the effects of inflation to some extent by manufacturing outside the UK, but a UK-based fitted wardrobe company I back has seen their underlying costs rise further. Another factor that has seen cycling shoe brands buck the trend a bit this year is that they have started selling in B2C, although this incurs additional costs (staff and returns) which eat into their B2B sales.”
Unleashed highlighted that despite concerns about profitability, the industry has reduced lead times to an average of 23.5 days, the lowest level on record.
In April, Unleased reported that a small to medium-sized UK-based clothing manufacturer saw its revenue fall by 40% in the first quarter of this year.
From the source Just Style
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