Global lingerie giant’s downbeat outlook would not affect Sri Lanka: apparel industry

By Chandeepa Wettasinghe
The negative outlook on global lingerie giant Victoria’s Secret for this year is unlikely to have a major impact on Sri Lanka’s apparel industry, a major supplier to the high end lingerie brand, experts Mirror Business talked to opined. 
“I’ve spoken to some of the major Victoria’s Secret suppliers here, and they say that Victoria’s Secret is not looking at reducing their supply from Sri Lanka. In fact they’re looking at expanding here for many reasons. One is maybe due to socially responsible production here,” Sri Lanka Apparel Exporters Association Chairman Felix Fernando said.
He noted that Sri Lanka is the largest supplier of products on Victoria’s Secret’s supply chain.
US-based L Brands Inc., the parent company of Victoria’s Secret, had not responded to Mirror Business’s queries on its plans for Sri Lanka at the time of printing.
L Brands last week announced a negative guidance for Victoria’s Secret for 2017 and the first quarter of 2017, coupled with a mid-teen year-on-year fall in sales from its stores in February, due to a restructuring effort where the lingerie brand will focus on core products, while shedding swimwear, footwear and other apparel.
Joint Apparel Association Forum Immediate Past Chairman Noel Piyathilake said that Sri Lanka’s apparel sector is now mature enough to deal with many types of shocks.
“I don’t think there will be much of an impact in a one month drop. We have gone through worse in the past,” he said.
According to him, Sri Lanka supplies around US$ 700-800 million out of its US$ 4.7 billion total apparel exports to Victoria’s Secret annually, while Fernando noted that Victoria’s Secret could have even a larger share of Sri Lanka’s apparel exports.
In 2016, the lingerie giant posted net sales of US$ 12.57 billion, with cost of sales, buying and occupancy of US$ 7.45 billion.
According to Piyathilake, MAS Holdings (Pvt) Ltd and Brandix Lanka Ltd account for the largest share of Victoria’s Secret’s production in Sri Lanka. Attempts to reach spokespersons of both companies were unsuccessful.
Industry sources say that these giants are currently rejecting or sub-contracting many orders due to excessive demand.
MAS Holdings, which Forbes called Victoria’s Secret’s secret in the Indian Ocean, too has been diversifying its customer base in the past decade. The recent fabric park MAS launched in Giriulla, will be dedicated towards athletic and lifestyle brand Nike.
However, pressure isn’t just coming from Victoria’s Secret, as Marks & Spencers (M&S), a popular British clothing retailer announced that it  is converting its clothing and household units into more profitable food units due to competition from online and budget retailers. 
Many other traditional retailers are also facing stiff competition.
Piyathilake and Fernando’s sentiments on the local industry’s resilience to meet such challenges were confirmed by Sriyan Wijeratne, CEO of Teejay Lanka PLC, a listed value-added knitted fabric maker, and a Victoria’s Secret and M&S sourcing partner.

“The Sri Lankan apparel industry is now mature enough to handle any shocks from one market. The industry is able to move across portfolios of customers. With GSP Plus coming in, we will be able to handle ups and downs of some retailers even better,” he said.
Wijeratne noted that in the case of Victoria’s Secret’s February sales, the local industry may have felt the effects months earlier.
“There are timing differences as well as regional differences. The business impact from a supply chain is several months earlier,” he said.
Sri Lanka’s exports to the world slightly declined from September to December 2016, with exports to the US and the EU—which account for 85 percent of Sri Lankan apparel exports—falling or remaining flat in the duration. Many had believed that elections and a referendum in the US and the UK respectively, were the reasons for the dip.
“It’s hard to distinguish exactly how each affected,” Wijeratne said, when asked if the elections or the contraction of main retail partner operations had contributed to the fall in exports.
He said that brands who continue to balance their portfolios by attracting up and coming online and budget retailers would also be able to move ahead much more confidently. Meanwhile, Fernando said that Sri Lanka’s apparel exports have mostly been growing in non-traditional countries such as Japan, India and China in recent months, and that the government’s intentions of negotiating trade deals with these countries would help Sri Lanka diversify its market and reduce risks as well.