Vietnam's garment manufacturers face mounting headwinds

Despite first-half solid business performance by some major manufacturers such as Vinatex and TNG, the Vietnamese textile-garment sector continues to face pressure from weak demand, rising costs and intensifying competition heading into the second half of the year.

According to the Vietnam Textile and Apparel Association (VITAS), Vietnam's textile and garment exports reached an estimated $22.2 billion in the first six months of 2026, up 1.7% from a year earlier.

The industry maintained a trade surplus of nearly $10 billion, continuing to make a positive contribution to Vietnam's overall trade balance.

Growth was driven primarily by exports of fiber, fabrics, textile materials and non-woven fabrics, which rose between 5.6% and 10.6%.

By contrast, garment exports edged down 0.4% as consumer demand in major overseas markets remained subdued.

The U.S. remained Vietnam's largest export market. During the first five months of the year, textile and garment exports to this market totaled $6.81 billion, up 1.3% year on year and accounting for around 45% of Vietnam's total export value.

The EU emerged as the strongest-performing market, with exports rising 8.8% to $1.94 billion. Shipments to Japan and South Korea, however, fell 6.2% and 8.9%, respectively.

Against this backdrop, financial performance across listed textile and garment companies remained uneven. Firms with stable order books, higher operating efficiency and tighter cost controls continued to expand, while others faced declining profitability.

Vinatex, TNG sustain growth momentum

Hanoi-headquartered Vietnam National Textile and Garment Group, or Vinatex (UPCoM: VGT), estimated consolidated revenue of VND10.05 trillion ($382.62 million) in the first half of 2026, completing 46.9% of the year's target and rising 9.6% from a year earlier.

Its consolidated pre-tax profit is estimated at VND882.9 billion ($33.61 million), equivalent to 64% of its full-year plan and up 32.4% year on year.

Parent company revenue reached an estimated VND1.13 trillion ($43 million), up 1.7% from a year earlier, while pre-tax profit climbed 75.7% to VND206.9 billion ($7.88 million), representing nearly 80% of the year's target.

Thai Nguyen province-headquartered TNG Investment and Trading JSC (HNX: TNG) also maintained strong revenue growth.

The company generated VND1.05 trillion ($39.98 million) in revenue in June, up 12.2% from a year earlier. Its second-quarter revenue rose 15.3% to VND2.91 trillion, while the first-half figure increased 20.5% year on year to VND4.87 trillion.

The firm has completed 51.2% of its 2026 revenue target of VND9.5 trillion ($361.68 million), highlighting resilient business performance despite continued volatility in major export markets.

By contrast, Ho Chi Minh City-headquarterd Thanh Cong Textile Garment Investment Trading JSC (HoSE: TCM) posted modest revenue growth but weaker profit.

Its parent company revenue during the first five months of 2026 rose 2% year-on-year to more than VND1.61 trillion ($61.29 million), equivalent to roughly 38% of the year's target.

Net profit, however, declined 32% to VND94.1 billion ($3.58 million), fulfilling about 32% of the company's full-year plan.

Garment manufacturing remained TCM's largest business segment, accounting for 71% of total revenue, followed by fabric production at 20% and yarn at 8%.

Asia continued to be the company's largest export destination, representing 64.1% of export revenue during the first five months. South Korea accounted for 22.9%, the Vietnamese market 15.4%, Japan 14.4%, and China 6.6%. The Americas made up 25.7%, while Europe 9.3%.

Efforts to secure orders and contain costs

Alongside their business performance, textile manufacturers are implementing measures to navigate market uncertainty and rising production costs.

According to its 2026 annual shareholders' meeting resolution, TNG has secured orders through October 2026, while geopolitical tensions have not materially affected its production volumes or selling prices.

To maintain double-digit growth this year, the firm will continue focusing on long-standing international brand customers, including DCL (Designer Clothing for Less) and Columbia.

The company also plans to maintain a balanced sales mix between the U.S. and Europe while expanding market share in Canada and other countries with free trade agreements with Vietnam.

With raw material prices rising between 5% and 10%, and some polyester fabrics increasing by as much as 15-20%, TNG said it had procured materials in advance for the autumn-winter 2026 production season, limiting the impact of high costs.

For the spring-summer 2027 pricing cycle, the company plans to work closely with customers and suppliers to mitigate cost pressures.

TNG is also prioritizing long-term suppliers, consolidating purchase orders and reducing certain inspection costs to improve production efficiency.

TCM said it has secured around 75% of its third-quarter order plan and continues to receive orders for the fourth quarter, with leadership expecting factory utilization to remain stable.

To offset higher production costs, particularly fuel expenses, the company is investing in automation, technologies and artificial intelligence to improve productivity.

The firm said demand in the U.S. has yet to recover meaningfully due to macroeconomic and geopolitical uncertainty, prompting customers to remain cautious about placing new orders.

As a result, the company plans to expand orders from Japan and South Korea to offset weaker demand in the U.S. market while preserving operating efficiency and profitability.

Order pressure persists

Vinatex expects market conditions to remain challenging in the second half of 2026.

Consumer demand in major export markets remains weak, pricing pressure is intensifying, and borrowing costs and raw material prices could continue to fluctuate. At the same time, competition from other textile-exporting countries is becoming increasingly fierce.

The group said maintaining profit margins remains the key challenge for yarn manufacturers as demand softens, while garment producers are likely to face continued order shortages and more aggressive price competition during the third and fourth quarters.

VITAS said Vietnam's textile and garment sector continues to face structural challenges, including slow demand recovery, intense price competition, dependence on imported raw materials for 60-70% of input needs, and rising costs associated with ESG compliance and product traceability.

The industry also faces regulatory risks, particularly from the U.S.'s Section 301 investigation related to forced labor issues.

"Vietnam's textile and garment industry has limited room for further expansion based on volume alone," VITAS chairman Vu Duc Giang said. "Future growth will depend on higher productivity, greater value-added production, stronger domestic sourcing, market diversification, and accelerated digital transformation and green transition."

After generating more than $22.2 billion in export revenue during the first half of the year, the industry aims to sustain monthly exports of more than $4 billion in the second half, targeting $48 billion in exports for 2026.

Achieving that goal will require manufacturers to adapt to evolving sourcing strategies adopted by global brands, strengthen domestic supply chains, diversify export markets and product portfolios, manage legal risks associated with Section 301 investigations, and accelerate investment in technology, digital transformation and green transition to improve productivity and competitiveness.