Textile and Apparel Co. Stock Price Drop Excessive... "Investor Sentiment Expansion Effective"

[Asia Economy Reporter Minji Lee] The textile and apparel index is showing a downward trend amid external environmental uncertainties. Securities experts evaluated that the decline was excessive due to psychological factors and that there is sufficient potential for growth considering consumer indicators.

According to the Korea Exchange on the 4th, the textile and apparel index fell about 7% from the 1st of last month to the 2nd. It was the second largest decline among all KOSPI sector indices. Although it benefited during the reopening period, ongoing macroeconomic uncertainties have somewhat reduced investor interest. Additionally, concerns over second-half earnings across consumer stocks were influenced by weakened consumer spending power due to interest rate hikes and rising prices.

Hyunjin Park, a researcher at Shinhan Financial Investment, said, “Concerns have grown that domestic clothing consumption might follow the US’s sluggish consumption pattern as Korea’s clothing inventory reversed from a declining trend to an increase. However, attention should be paid to the fact that both online and offline clothing consumption maintained double-digit growth rates even in July.”

July and August are seasonal off-peak periods, yet the base effect from the same period last year is prominent. Department store sales of women’s suits and women’s casual wear in July increased by 38.4% and 41.3%, respectively, compared to the same period last year. Sales in men’s clothing, children’s wear, and sportswear also rose by 38% and 48.5%, showing improved growth rates compared to May and June.

Not only consumer indicators but also actual domestic performance of companies is showing high growth. Textile and apparel companies reportedly grew more than 30% in July compared to the same month last year. Researcher Park explained, “Although August saw frequent heavy rains that could deepen the seasonal off-peak slump more than expected, domestic textile and apparel companies have not made significant remarks about their performance yet. The IR tone is similar to the flow in May and June.”

While it is still difficult to make definitive judgments about the Chinese market, attention should be paid to the large potential for new order demand going forward. Researcher Park said, “The first hopeful factor is that clothing retail in China has maintained the same level as the previous year from March to May, confirming a bottom. The second hopeful factor is that companies like F&F, which have entered China, and The Nature Holdings, which will enter soon, have not yet exceeded three years of business operation in China and still have high potential for new order demand due to seasonal changes.”

This content was produced with the assistance of AI translation services.