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Tuesday, July 23, 2024

Gross profit margins may recover for Vietnamese textile companies in 2024

A research report indicates that the gross profit margins of Vietnamese textile companies will gradually improve to 14-15 percent in 2024 due to slow demand recovery throughout the year.

“However, it is difficult for profits of these companies to return to 2022 levels in 2024,” the SSI Research report on the outlook for the Vietnamese textile industry in 2024 pointed out.

According to the report, the gross profit margin of textile companies has decreased from 15-18 percent in 2022 to 11-14 percent in 2023.

In 2024, SSI Research expects the gross profit margin of these companies to gradually improve to 14-15 percent due to slow demand recovery throughout the year.

The report said that global economic growth is expected to improve little in 2024, mainly due to reduced consumer spending levels because non-essential spending often has a lengthy recovery period.

This is one of the critical challenges for global fashion brands and retailers, so 2024 looks uncertain for both brands and suppliers 2024.

Furthermore, inventory management and cost control will remain a key focus for retailers. This will shorten ordering times and reduce selling prices for textile and garment exporters.

The report pointed out that while Vietnam outperforms Bangladesh in quality and production capacity, its nearest competitor, Bangladesh, has an advantage in price and taxes.

But Vietnam continues to rank higher in product quality, labor productivity, and delivery times, factors which are more important for brands and retailers during the economic recovery period.

SSI Research believes that the Vietnam Textile and Apparel Association (VITAS) forecast on export growth is optimistic, with exports targeted at US $44 billion in 2024, up 9 percent over 2023.

Providing its analysis of the disruptions on the Red Sea, SSI Research stated that exporters may have to either bear higher selling costs or lower prices till the Red Sea situation cools down.

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