Clothing chains race to go local

Once you have a 10-year gap in skills, it’s gone. If you want a production manager, they don’t exist

TRADING updates by Truworths and Foschini on Thursday suggest that the fashion industry is a tad frayed around the edges. Truworths sank 8% on news that sales rose just 4.7% in the 18 weeks to November 2, compared with 7% growth in the corresponding period last year. Foschini reported that first-half headline earnings a share were up a mere 3.3%.

Analysts said the statements reflected the general slowdown in credit-based consumer spending as well as rising defaults on debt and higher interest rates.

By contrast, earnings at Mr Price, which sells most of its goods for cash, jumped 24% in the six months to September.

Beyond the obvious correlation with spending patterns, Mr Price has cut costs by using local cut, make and trim (CMT) outfits in Durban, and Mauritius, rather than relying on China.

Holmes Brothers, a pioneer in using domestic CMT factories, has long known that home-grown is the smart way to go. Most of its production is farmed out to about 10 CMT factories, all in Durban.

“Fabrics, everything, within a 40-minute drive,” says Gary Holmes. “Our contacts are like gold — little factories we’ve been using for years and years, working flat out for nine months of the year.”

Yet it remains hand to mouth — backyard operations, holes in the wall, guys in garages. A far cry from 20 years ago, when Durban was a hub of the garment industry.

“You could make anything here,” says Laurie Holmes. “Wall-to-wall clothing factories. Nothing was imported. We had mills in Hammarsdale weaving the most beautiful denim. South Africa was exporting denim. They just closed down. No volume demand from the chain stores.

“We lost about 400 000 jobs because it was so easy to do it out of China. Local factories couldn’t scale up; there was no money for machinery. They collapsed, apart from the T-shirt side, which survived because it’s a quick turnaround product.

“China was clever, taking global manufacturing away. It put in 45% subsidies so it undercut everybody and shut down local industries. Once they got their market share, the government pulled its subsidies. So Chinese prices have gone up 35% in the past 18 months.

“Now Mr Price and Woolworths have started to use factories in Durban, scratching to get the local industry going. Fashion has become a lot more instant. Zara in Spain turns things around in six weeks. They’re trying to do the same here.

“The problem is, once you have a 10-year gap in skills, it’s gone. We’ve bought machines for our factories and helped them set up to get the quality right. But, if you want to employ a production manager, they don’t exist — someone who knows where factories are, where to get fabric, how to run a production line.”

For investors, the obvious question is: who will be quickest out of the blocks?

However, as Laurie Holmes warns: “There will be some major casualties.”