The political crisis in Egypt is bringing commerce to a standstill, threatening to dampen consumer sentiment across the region, and forcing textile and apparel manufacturers to create contingency plans.
This story first appeared in the February 1, 2011 issue of WWD. Subscribe Today.
Carrefour SA, the world’s second-largest retailer behind Wal-Mart Stores Inc., said rioters pillaged one of its five hypermarkets in Egypt, but it did not detail the scale of the damage.
“The other stores are closed but did not suffer any damages,” a spokeswoman for the retailer said Monday. Carrefour is present in Egypt through its Middle East franchise partner Majid Al Futtaim, which also operates Carrefour stores in Jordan, Syria and United Arab Emirates, among other countries.
Hennes & Mauritz, the world’s third-largest clothing retailer, said its Egyptian franchise partner, Alshaya, has chosen to temporarily close the three H&M stores in Egypt — two in Cairo and one in Alexandria. “This is a precautionary action and all staff is unharmed,” said H&M spokeswoman Charlotta Nemlin, adding that Alshaya was monitoring the situation.
H&M has several suppliers in Egypt and Tunisia, but production has not been affected to its knowledge.
Spain’s Inditex SA, the owner of the Zara retail chain, said it had not noted any significant impact from recent turmoil in Arab countries, including Tunisia and Jordan. Based in Arteixo in northwest Spain, Inditex manufactures half its products in the Eurozone, making it less reliant on other regions than its competitors.
Famous for its cotton and textile industry, Egypt is a key supplier to both the fashion and home industries, “and turmoil of any sort in a supplying country could lead to a disruptive supply chain,” said Adam Mansell, chief operating officer of the U.K. Fashion and Textile Association (UKFT). “Most companies have an alternative source of supply which they can turn to to meet demand —although they may not be able to offer the same lead times or indeed may have to absorb additional costs of existing orders. This is why having a balanced sourcing strategy is best and weighing up not just price but also political stability when selecting a sourcing country also has to be taken into account.”
British designer Katharine Hamnett, a longtime social activist who manufactures her sportswear line in Italy and Tunisia, said she would keep production in the latter country. “I think we have a moral obligation to support these people in their struggle for democracy — and hope the retailers are sympathetic in the end,” she said. “These people are putting their lives on the line, they are prepared to die, and we need to support them any way we can. I just pray that they listen to [U.S. President Barack] Obama, and know that violence does not solve anything.”
Asked if she’s been in contact with her factories in Tunisia, she said the Internet is down, so she’s been unable to get through. “Nobody’s pulling alarm bells yet, but I do think the unrest is another element in the supply-chain stress from rising raw material and labor costs,” noted Malcolm Ball, chairman of the Association of Suppliers to the British Clothing Industry, whose members include Marks & Spencer, Next and Arcadia Group. “It’s another shake of the tree. But none of our members has pulled out of Egypt. I think people are watching to see what happens.”
Meanwhile, some manufacturers in the region are closing facilities in Egypt or making plans to move production in the region.
A spokeswoman for Delta Galil Industries, an Israeli company that produces innerwear for Lucky Brand and the licensed Tommy Hilfiger sleepwear at Macy’s, would only say, “We have factories in Egypt…scary times.”
Amit Meridor, chief executive officer of Israel-based Tefron Ltd., a seamless apparel specialist whose clients include Hanesbrands, Calvin Klein Underwear, Victoria’s Secret, Patagonia, Gap and Wal-Mart, said he’s “confident” Israeli business will not be impacted.
“There have been many wars in the region over the past 60 years, and I am confident we will be able to pass this crisis. We have a sewing facility in Jordan, away from Amman, and if we have to we’ll move it to Israel. It would cost me more but it would ensure that business will not be affected in the longterm,” said Meridor.
Tremors from Egypt’s upheaval are being felt in nearby countries.
“Beirut is linked to the whole region and everyone is wondering how the Egypt crisis will be affecting us as Egypt was a factor of stability here,” said Lebanon-based Tony Salamé, owner of the Aïshti luxury multibrand boutiques.
Lebanon itself is going through a transitional phase as Hezbollah, the Shiite political and militant group, and its allies toppled the government headed by Prime Minister Saad Hariri in mid-January, leaving Salamé wondering what regulations will be reinforced in the future.
“It’s very tense here, travelling is really slow and business was weird this last month of January. This is killing us, we are worried about what’s happening and people are not in the mood to shop,” Salamé said. “A lot of people are worried [the crisis] may move from one country to another. Maybe Jordan? Maybe Yemen?”
• Egypt is the 17th largest exporter of apparel and textiles to the U.S., having shipped $1 billion to this country in the year ended Nov. 30, 11.8 percent above the prior year.
• The most recent figure represents a 1.1 percent share of apparel and textile imports to the U.S., according to the U.S. Department of Commerce.
• Egypt’s most substantial import to the U.S. is bottoms, accounting for 3.3 percent of imports of women’s and girls’ cotton trousers and shorts, or $219.1 million; 3.4 percent of men’s and boys’ cotton trousers and shorts, or $181.5 million; 4.2 percent of men’s and boys’ wool trousers and shorts, or $11.4 million, and 3.3 percent of men’s and boys’ man-made fiber trousers and shorts.