Footwear Industry In Doldrums
Export drops by 50pc, domestic sales further below
Exporters of leather products and footwear were also adversely affected by the pandemic, which caused the global economy to suffer.
President of Leather Goods and Footwear Manufacturers and Exporters Association of Bangladesh Md Saiful Islam said that their total exports have declined by 50 percent in the April-August period this year bearing the impact of Covid-19 pandemic.
Saiful Islam told the media that in such critical circumstances, the industry was facing huge losses because of declining business and drastic fall in buyers' orders. Businesses were unlikely to recover to usual levels for at least another year if the pandemic continued, he feared.
He said for the last couple of years, the country's leather industry was going through a crisis over environmental and social compliance issues which pushed export earnings down. In fiscal FY20, exports fell 22 percent to $798 million.
Industry wise most footwear producers suffered the heaviest loss. Apex Footwear's net profits witnessed a sharp decline in the 2019-20 fiscal year, with the company's sales dropping both domestically and internationally due to the pandemic.
Apex Footwear made a net profit of only Tk6.32 crore, down by 48.49 percent in FY 20, which had been Tk12.27 crore in FY19. Its per share earnings also declined by 48.50 percent to Tk5.62; which was Tk10.91 in the previous fiscal.
Company Secretary of Apex Footwear Md Omar Faruque told The Daily Observer that the sharp fall of earnings was caused by lower sales during the April-June period. It missed big business events like Eid-ul-Fitr, Pohela Baisak when people were forced to stay in-door resulting resulting in a drastic drop in sales when the company books the highest business.
Moreover exports of leather goods also declined due to supply chain disruption across the globe. Industry insiders said usually around 40 percent of sales came during Eid-ul-Fitr, this year it was around 20 percent only.
Bata Shoe's sales dropped by 85.37 percent to Tk41.24 crore in the second quarter of 2020. Sales also dropped 55.37 percent to Tk204.92 crore in the first six months of 2020. The company reported a loss per share at Tk89.23 for nine months (Jan-Sep'20).
Currently, the footwear sector accounts for 3.3 percent of the overall export basket. The domestic market size of footwear is around Tk17,000 crore and domestic demand for the footwear is around 200 to 250 million pairs a year.
In 2018-19, Bangladesh exported $607.88 million worth of leather footwear and $271.53 million worth of non-leather footwear. Global footwear market was valued at $246 billion in 2017 and was expected to reach $320 billion by 2021.
There are currently 220 tanneries, 2,500 manufacturing units and 90 larger firms operating in the country.
The crisis in the leather sector deepened with the slow relocation process of tanneries from Hazaribagh to the Savar Leather Industrial Park. The sector is yet to become compliant and environment-friendly due to the lack of a functional central effluent treatment plant (CETP).
In the given situation, it is crucial to restore buyers' confidence through ensuring compliance and certification from the Leather Working Group (LGW).
Chairman of Research and Policy Integration for Development, Mohammad Abdur Razzaque said that the leather sector needed a sector-specific, realistic and modern policy framework to address its long term challenges.