Truworths Research Report

Supply Chain Interrupted – Impact on SA Clothing Retailers

With growing evidence that the Coronavirus crisis could significantly impact sourcing from China, we quantify the risk to the SA clothing retailers’ sales and margins, by modelling the impact of supply disruption over the coming months. Given the complexity of clothing retail supply chains, retailers cannot rely on generic buffer stock to see it through a supply crisis. While the retailers argue that they can mitigate the impact of the supply disruption using airfreight or shift supply to other countries, we show that these options have some complications which could diminish the effectiveness of such strategies. We model the impact on the clothing retailers for periods ranging from one to four months and conclude that WHL and TFG may have the greatest risk to the Coronavirus supply disruption, while MRP could be the least impacted. The timing of the reporting periods will cloud the comparative impact, as WHL and TRU’s burden could be halved over two reporting periods. On the other hand, the impact on TFG and MRP could be amplified as a four-month disruption could be accounted for in their 1H21 half-year period.