Korean garment maker Hansae targets growth amid economic woes

HO CHI MINH CITY – South Korean garment maker Hansae Co. expects to see decent growth in sales and profits next year despite the global clothing industry’s overall slowdown amid growing economic and geopolitical uncertainties.

During an investor relations session held in Ho Chi Minh City, Vietnam on Thursday, executives of the apparel maker’s parent Hansae Yes24 Holdings Co. said they will actively seek mergers and acquisitions while focusing on core, profitable sectors such as activewear goods.

“We are closely looking at upcoming M&A opportunities. At the same time, we’re actively investing in logistics and content-related businesses in the US,” said Kim Ik-whan, vice chairman and chief executive of Hansae Co.

Hansae has its largest overseas production base in Vietnam.

Hansae is an unfamiliar name to many Koreans but among original equipment manufacturing (OEM) companies in the apparel industry, it is a big name that produces nearly a third of all clothes Americans wear.

Hansae counts global fashion brands such as GAP, H&M and Zara among its major clients, for which the Korean company makes clothes under an OEM contract.

Its clothes, manufactured under OEM or original design manufacturing (ODM) schemes and bearing labels such as GAP, Banana Republic, Old Navy, Carhartt and Pink, are mostly sold at large retailers such as Walmart and Target in the US and Coles in Australia.

Globally, Hansae has about 30 casual wear companies it calls clients.

GROWING PROFIT MARGIN

The global fashion and clothing industries are reeling from the unstable supply chain due to growing geopolitical risks in the Middle East and an overall economic slowdown in the post-pandemic era.

According to the US Association of Importers of Textiles and Apparel, the country’s apparel imports this year are forecast to decline 21.9% to $78 billion from last year’s $99.9 billion as importers’ inventories rise.

Hansae also expects its 2023 sales and operating profit to fall 20% and 11%, respectively, to 1.76 trillion won ($1.3 billion) and 160 billion won.

Company executives, however, said they will strive to return to growth next year, targeting a 15% sales increase to a 2 trillion won range and a 13% rise in operating profit to 180 billion won.

Vice Chairman Kim said the clothing ODM industry is currently dominated by a small number of suppliers, which offers Hansae a good business opportunity for growth.

“Due to the oligopolistic situation, our sales in the US are declining due to the weak consumer sentiment. But our operating profit margin is improving,” he said.

Hansae’s profit margin, which has steadily grown to 8% in 2022 from 5% in 2019, is expected to rise further to 9% this year.

TO EXPAND LATIN AMERICAN SALES NETWORK

Kim said the company is also striving to improve its supply chain by moving away from China and Russia.

“Due to the law prohibiting forced labor in the Xinjiang Uyghur region, clothing produced there cannot be exported. We also need to avoid production in countries close to Russia and China," he said. “Customers want clear proof of the origin of [their] clothing.”

The vice chairman said Hansae has signed a business deal with a New Zealand company, which has the ability to certify the origin of clothing and is in the middle of expanding its sales network in Latin America for a stable supply of goods to the US market.

At the investor relations session in Vietnam, Hansae MK Co., a business-to-consumer fashion company of Hansae Group, said it will relocate part of its facilities in China and Vietnam to Indonesia and Malaysia.

“We will introduce well-known imported brands to Korea next year. In overseas markets, we’ll develop products tailed to each market as well as expand our sales outlets,” said Hansae MK Chief Executive Lim Dong-hwan.

Write to Kyeong-je Han at hankyung@hankyung.com

In-Soo Nam edited this article.