• Thursday, Dec 03, 2020
  • Last Update : 12:35 am

Covid-19 fallout: Footwear, leather products sector yet to recover

  • Published at 09:22 pm October 24th, 2020
Leather Shoes
Syed Zakir Hossain/Dhaka Tribune

Exporters of leather products and footwear were also adversely affected by the pandemic, which caused the global economy to suffer

The earnings from the country's leather products and footwear sector took a drastic fall due to lack of sales during the three major festivals of 2020 - Eid-ul-Fitr, Eid-ul-Azha and Pohela Boishakh - as a result of the Covid-19 pandemic, which forced people to stay indoors

Exporters of leather products and footwear were also adversely affected by the pandemic, which caused the global economy to suffer.

Local footwear and leather products giant Apex Footwear’s net profits witnessed a sharp decline in the 2019-20 fiscal year, with the company’s sales dropping both domestically and internationally due to the pandemic.

According to their financial statements for FY20, Apex Footwear made a net profit of Tk6.32 crore, down by 48.49%, which had been Tk12.27 crore in FY19.

As a result, earnings per share of the company also declined by 48.50% to Tk5.62, which was Tk10.91 in the previous fiscal.

Talking to Dhaka Tribune, Company Secretary of Apex Footwear Md Omar Faruque said that the sharp fall of earnings was caused by lower sales during the April-June period. 

Although a key period during the year as both Pohela Boishakh and Eid-ul-Fitr falls under it, people were forced to stay indoors due to the pandemic, resulting in a drastic drop in sales at a time when the lion's share of income was generated for companies like Apex, he added.

Besides, exports of footwear and leather goods also declined due to supply chain disruption across the globe caused by the pandemic.

The sector people said that usually around 40% of sales came during Eid-ul-Fitr, when mostly new and high-value products were sold. 

But due to the pandemic, the company missed out on the opportunity as people avoided shopping due to the pandemic, they added.

Meanwhile, another publicly listed company, Bata Shoe Company (Bangladesh) Limited’s sales dropped 85.37% to Tk41.24 crore in the second quarter (April-June) of 2020. Sales also dropped 55.37% to Tk204.92 crore in the first six months (Jan-June’20) of 2020.

Bata also reported a loss per share at Tk89.23 for nine months (Jan-Sep’20), resulting in a Tk112.74 loss compared to Tk23.51 in earnings per share during the same period of the previous year.

Company Secretary of Bata Shoe Md Hashim Reza said that the significant deviation in EPS was due to lower profit after tax compared to last year in the same period, as a result to lower sales volume amid the pandemic.

Currently, the footwear sector accounts for 3.3% of the overall export basket. 

The sector at a glance

The domestic market size of footwear is around Tk17,000 crore. 

Domestic demand for the footwear industry is around 200 to 250 million pairs a year. 

In 2018-19, Bangladesh exported $607.88 million worth of leather footwear and $271.53 million worth of non-leather footwear.

Global footwear market was valued at $246 billion in 2017 and was expected to reach $320 billion by 2021. 

There are currently 220 tanneries, 2,500 manufacturing units and 90 larger firms operating in the country.

Compared to the previous year, during the first quarter (Jan-April), overall export earnings from leather products and leather footwear was $248.25 million in 2019 whereas in 2020 it exported $200.43 million, a 19.26% fall, according to the Leathergoods and Footwear Manufacturers and Exporters Association of Bangladesh (LFMEAB).

LFMEAB President Md Saiful Islam said that their total exports had reduced by 50% in the April-August period this year.

Saiful Islam said, in such critical circumstances, member factories of their association were facing huge economic impact because of declining business and current orders amid the pandemic. 

Businesses were unlikely to revert to usual levels for at least another year if the pandemic continued, he feared.

For the last couple of years, Bangladesh’s leather industry has been going through a crisis over environmental and social compliance issues, which have pushed export earnings down. In the last FY20, exports from the sector fell by 22% to $798 million.

The crisis deepened with the slow relocation process of tanneries from Hazaribagh to the Savar Leather Industrial Park.

The sector is yet to become compliant and environment–friendly due to the lack of a functional central effluent treatment plant (CETP).

In the given situation, it is crucial to restore buyers’ confidence through ensuring compliance and certification from the Leather Working Group (LGW).

Chairman of Research and Policy Integration for Development, Mohammad Abdur Razzaque said that the leather sector needed a sector-specific, realistic and modern policy framework to address its longstanding challenges. 

Efficient operation of the tannery estate should be of utmost priority in building an export supply response, he added.

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