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Mexico: 80% of footwear companies lost more than 51% revenue
As footwear is not considered an essential sector, the industry is living with the suspension of activities and facing cancellations of purchase orders, liquidity issues and reduction in demand
The situation is not easy in Mexico. Through the nationwide COVID-INDUSTRIAL surveys reveals that “if the current conditions of suspension of operations imposed by the Federal Government were to continue for 30 days more, many would see it necessary to make decisions about closing business”, told us the Chamber of the Footwear Industry of the State of Guanajuato (CICEG).
“This situation is exacerbated by the lack of support for the national industry from the Federal Government, which has not reacted to the Covid-19 crisis in the same way as other regions of the world, where there has been strong support for the private sector, not only to protect the health of individuals, but also that of companies”, CICEG argues.
The survey COVID-INDUSTRIAL, carried out between the 24th and the 27th of April*, found out that 99% of these companies have seen their revenue affected by the Covid-19 sanitary contingency. 8 in 10 of the surveyed companies said that the impact on revenue has been above 51%. According to the results, close to 60% will reduce their sales objectives due to the current situation, while only 8% will increase them.
Regarding future perspectives and when production will be normalized again, 35% responded that it is uncertain, however 24% hope to do it in June. To the same question, 22% answered in the final quarter and 12% in the third quarter of the year.
Due to the current situation, 49.5% of participating companies have had to reduce their workforce, while 46.3% state they have maintained the same number of employees.
“This situation is exacerbated by the lack of support for the national industry from the Federal Government, which has not reacted to the Covid-19 crisis in the same way as other regions of the world, where there has been strong support for the private sector, not only to protect the health of individuals, but also that of companies”, CICEG argues.
The survey COVID-INDUSTRIAL, carried out between the 24th and the 27th of April*, found out that 99% of these companies have seen their revenue affected by the Covid-19 sanitary contingency. 8 in 10 of the surveyed companies said that the impact on revenue has been above 51%. According to the results, close to 60% will reduce their sales objectives due to the current situation, while only 8% will increase them.
Main Issues
The four most recurring issues faced by the sector are: cancellation of purchase orders (83.2%), suspension of activities (81.1%), liquidity (74.7%) and drop in demand (73.7%).Regarding future perspectives and when production will be normalized again, 35% responded that it is uncertain, however 24% hope to do it in June. To the same question, 22% answered in the final quarter and 12% in the third quarter of the year.
Due to the current situation, 49.5% of participating companies have had to reduce their workforce, while 46.3% state they have maintained the same number of employees.
Another problem impacting the footwear industry is contraband and illegal imports (which 65% of the enquiries said it increased). Near 80% believe stopping illegal imports would reactivate the country’s economy.
Government' Support
Mexican business owners have a primary request for the Government: they claim help to keep jobs and they request deferrals for tax payments, credit with preferential rates and authorization to return operations, considering adequate health and hygiene measures. A recent update indicates that 87% of the surveyed companies have a health, safety and hygiene protocol ready to be applied as soon as activities are allowed to return.Sectorial Support
Through CICEG and CANAICAL (National Footwear Chamber), the Mexican industry is trying to put forward proposals to deal with Covid-19 in the supplier-leather-footwear-leather goods sector. In place is a “constant dialogue with the authorities to request support, maintaining employment sources; looking for new commercial and internationalization opportunities, as well as implementing health, safety and prevention protocols to make oprations return”. CICEG tells us that despite all the atypical and negative circumstances that the industry is facing, business owners are sure that they will make up for lost time thanks to synergies with distributors, suppliers as well as the support from Shoes From Mexico, a platform for international promotion and trade. The will to overcome the difficulties is translated by the 98.5% of footwear manufacturers who say they will restart activities as soon as it is possible to do so.
* The Confederation of Industrial Chambers of the United Mexican States (CONCAMIN), of which the Footwear Chamber of the State of Guanajuato (CICEG) and the National Chamber of Footwear (CANAICAL) are part, is conducting the weekly surveys COVID-INDUSTRIAL. The aim is to monitor the industry at national level. The survey carried out between the 24th and the 27th of April included a sample of 101 companies from the footwear and leather goods industry, of which 76.23% are SMEs. 8 in 10 focus principally on the national market and only 16.83% focus on export markets.
