How the fashion industry is impacted by U.S., China tensions

Rick Helfenbein, Retail & Fashion Industry Consultant joins Yahoo Finance's Alexis Christoforous and Brian Sozzi to discuss Hong Kong's relationship with the United States. Helfenbein calls the city "a second home" for the fashion industry.

Video Transcript

ALEXIS CHRISTOFOROUS: Hong Kong's Hang Seng index rallied more than 3% today after President Trump announced the US and China would not take any immediate action to spark another trade war. But still a number of different industries closely watching what happens there, because it will definitely affect their bottom line.

Here to discuss this now is Retail and Fashion Industry Consultant, Rick Helfenbein. Rick, good to see you again. I want to talk about Hong Kong in relation to the fashion industry. I'm not sure a lot of people understand just what an important component Hong Kong is to that industry. Just first off, can you lay out what it means for retail?

RICK HELFENBEIN: That's easy, Alexis. Hong Kong is our second home. 40% of all apparel coming into the United States, 65% of all footwear, 80% of all accessories come from Hong Kong. That's their share of the US market. And quite frankly, any change in the status of Hong Kong affects our business dramatically.

We have offices over there. We have many buying offices over there. We use it as the hub of the wheel, as we look to the next generation trying to sell into China, versus running away from China. So for our industry, for the fashion industry, the apparel industry, the footwear industry, Hong Kong is our mainstay. Any adjustment to that hurts us severely. So you know--

BRIAN SOZZI: Rick more--

RICK HELFENBEIN: Yeah, hi, Brian.

BRIAN SOZZI: Hey, Rick, good to see you. More broadly on China, though, as you know, China is a key spot where we get a lot of our manufactured goods and retail, certainly in apparel. These rising trade tensions are coming when a lot of holiday orders are now starting to be placed. The COVID-19 pandemic doesn't help matters at all. But do you think we might see-- retailers might see rising costs for the inventory they're placing now?

RICK HELFENBEIN: Well, you know, there's not a lot of places to buy goods right now. Coronavirus had a lot to do with that. You know who is open? China is open. Vietnam is open. And the rest of the places where we buy goods are struggling. So demand is on the upswing. And yet, it's limited as to what we can buy, because a lot of these factories are just up and running.

And you need raw materials. So there there's a whole supply chain involved. And because of that, it's inflationary. On top of that, we have too much goods in the market. You know, Brian, I was listening to earlier on this show. And you know, the whole thing that's going on in America right now, we've moved from lockdowns to looting. I mean, lockdowns to looting, what's going on with retail?

It's extremely difficult for us out there. It's been difficult because of the lockdowns. It's been difficult because we've had trouble getting money to secure our liquidity. The PPP program hasn't been a real winner for our industry. And then for the larger brick and mortar groups, it's been hard to get money out of the fed and out of the federal government, because they have certain requirements for credit, which we don't easily sustain, I should say.

So we've been struggling with our liquidity. We need money to purchase goods. And now we're having trouble with our supply chain. And quite frankly, the political pressures that President Trump is using during the election year aren't helping our industry one bit.

And remember one thing, Brian, this is really important. In terms of the GDP of America, 2/3 is based on consumer spending. And essentially, one in four jobs are related to retail. So we need to get the retail up and running. And all this political tension isn't helping us at all, not one bit.

ALEXIS CHRISTOFOROUS: Rick, we've seen sort of, you know, the apocalyptic issues facing retail right now, JC Penney, J Crew in bankruptcy. Are there going to be other big name retailers who are just not going to be able to survive? And if so, who might that be?

RICK HELFENBEIN: Well, I prefer not to name names because of my prior group. Many of them are members. But you will see significant bankruptcies in the short-term future. As you said, we've had J.Crew. We've had Neiman Marcus. We've had JC Penney. We've had Stage Stores. All these are big names.

And you know, we've been trying to save the American farmer who's been in bankruptcy court. Watch out. The retailers are coming. Farmers are going to have to move out of the way. The problem, basically, for industry, times were tough before coronavirus. But now, knee deep into this, our liquidity is significantly suppressed.

We just don't have the money. We don't have the money to pay the people. We're opening the stores back up, but in a limited way, so in a limited way, you can't have full-time employment. And then on top of that, we have to buy goods. You need money for that. You need liquidity. And quite frankly, to some of us, we look at it, we go, you know, bankruptcy court might be the best option.

And you know, you say to yourself, where's the bailout money for the retail industry? You talk about bailout money for the cruise line industry, well, that's great, because that's the State of Florida. What about us? One in four jobs in America, we need some cash. We need some liquidity. We want to get people back to work. We want to get people in the stores. It's tough out there. This is a tough place to be right now.

ALEXIS CHRISTOFOROUS: That it is. Rick Helfenbein, thanks so much for painting the picture for us, definitely challenging times for retail in particular. Thank you.