Latest Global Sportswear Supply Chain Read-Through Remains Bearish

The S&P 500 Textiles, Apparel & Luxury Goods sub-industry index (S5TEXA Index), which includes names such as Nike, Lululemon, Deckers Outdoor, Ralph Lauren, and others, is down 15% year-to-date and roughly 65% from its late 2021 peak. With the index now hovering around Covid-era lows, Goldman analysts have published their latest read on textiles, apparel, and footwear, which explains why sentiment across the global industry remains so bleak. 

Analysts led by Michelle Cheng reported that major Asian sportswear OEM March orders were mixed, with Eclat outperforming peers, while Makalot and Yue Yuen delivered in-line first-quarter results despite holiday-related pressure in Indonesia. Feng Tay continued to report year-on-year declines in orders, and Huali reported muted first-quarter orders.

Cheng said the latest earnings season and outlook for apparel this year appear mixed. She noted that geopolitical tensions are beginning to cloud demand and ordering patterns, while higher raw material costs could increasingly pressure OEM margins in the second half of the year if input prices remain elevated.

She said competitiveness among brands may also limit suppliers’ ability to pass those costs through, particularly if brands push part of the burden back onto manufacturers. Nike’s slower-than-expected reset is another major headwind for the industry.

“Most players said March orders were unaffected; but select players have noted lower forward order visibility from brands due to rising costs and concerns over demand,” the analyst said.

She said that on the demand side, US conditions in March appeared resilient, based on commentary from Levi Strauss, PVH, and Nike, as well as high-frequency data – likely because the energy shock has yet to fully hit household budgets. Europe, the Middle East, and Africa were more uneven, she said, adding that sentiment across developed markets deteriorated after the outbreak of the US-Iran conflict.

Cheng said, “Sentiment worsened across developed markets following the start of the Iran war, but we will watch for data post the recent two-week ceasefire. At a brand level, we see negative read-across from Nike but positive from Fast Retailing.” 

She pointed to Pou Sheng International, a major Chinese sportswear retailer for Nike, Adidas, PUMA, and Converse, whose March sales fell 6% from a year earlier, reflecting a typical post-holiday slowdown. First-quarter revenue declined 1%, which was broadly in line with expectations.

As of March 26, the latest read of sportswear supply chains is largely bearish:

As for when the S5TEXA Index will finally bottom, that likely depends on a reversal in consumer sentiment. President Trump suggested on Sunday that elevated gasoline prices could persist through the second half of the year, reinforcing the risk that pressure on household budgets may continue into the summer.

Professional subscribers can read the full “Asia Pacific Textile, Apparel & Footwear” note here at our new Marketdesk.ai portal