Fashion inventories slashed by 60% across Australia

Clothing, footwear and accessories manufacturers across Australia have made a dramatic inventory clearance in the third quarter of 2025, slashing stock by 64.7 per cent – or from an average $151,967 to $53,588 – to the lowest level since the second quarter of 2019. 

This is according to a new report from Unleashed, which further noted that profit margins across the sector are up by 8.19 per cent, despite sales falling from $60,175 to $253,268 quarter on quarter. 

Unleashed’s quarterly report is based on data from more than 1000 Australian firms using its software, across manufacturing categories such as food and beverage, clothing and fashion, and construction.

Tim Deane, the owner of New Zealand clothing manufacturer Norsewear, said it has been a tough eighteen months, particularly for retailers, “but we're now seeing a modest recovery in market demand for the first time, which is hugely encouraging.”

"We need a sector-wide strategy to lower energy costs and better implement the use of technology to improve productivity,” he added.

The report also shows that lead times improved significantly from Q2's heavy delays, falling from 33 days to 18 days, though remaining marginally above the prior year baseline of 17 days. The sector's lead times now sit just above the manufacturing average of 16 days, while average stock on hand across all industries fell to $311,200 per business in Q3, down from $462,735 in Q2.

Fashion’s inventory and bottom-line performance reflect the broader trend across Australian manufacturing, “where firms are decisively abandoning buffer building in favour of lean operations that free up working capital while protecting profitability,” according to Unleashed. 

The average Australian small to micro manufacturer grew sales by 9 per cent to $625,400 in the quarter ending September 30, while expanding profit margins by 3.2 per cent.

"In spite of cautious consumer spending, spiking energy prices and high labour costs, Australian small and micro manufacturers have been adapting and thriving," Unleashed head of production and distribution Jarrod Adam said. "Manufacturers have found pockets of demand and capitalised on them. 

“The real story is operational awareness; firms have focused on growing revenue and expanding profitability without tying up capital in excess stock. That's a fundamental shift in mindset from the pandemic era of buffer building."

The report further noted that Australian producers have seen a large pullback in their purchasing of raw materials, falling 34.9 per cent quarter on quarter to $339,371. According to the report, this dramatic reduction in ordering, combined with the inventory drawdown, signals a fundamental change in strategy.

"The sheer velocity of the Q3 pivot is remarkable," Adam said. "Lead times down 36 per cent, stock down 33 per cent, purchasing down 35 per cent, yet margins up nearly 4 percentage points.”