Sales fell from $460,175 to $253,268 quarter on quarter (QoQ) as the sector navigated challenging consumer conditions, yet the aggressive destocking strategy delivered substantial margin improvement.
Lead times also improved significantly, falling to 18 days from 33 days in Q2, close to the prior-year benchmark of 17 days and slightly above the national manufacturing average of 16 days. The shift signals a return to operational normality after prolonged disruptions, Unleashed said in a press release.
Australian clothing and fashion manufacturers cut inventory by 64.7 per cent in Q3 2025 to the lowest level since 2019, while boosting margins by 8.19 per cent despite weaker sales, as per data from Unleashed.
Lead times improved and firms shifted from pandemic stockpiling to leaner, data-driven operations.
Executives said recovery signs are emerging.
The destocking move aligns with a broader manufacturing trend across Australia, where firms have shifted away from pandemic-era buffer building in favour of lean inventory strategies to protect profitability and liquidity. Nationally, small and micro manufacturers increased quarterly sales by 9 per cent to $625,400 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,” said Jarrod Adam, head of production and distribution at Unleashed. “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 also compared performance across the UK and New Zealand, concluding that Australian operations are leading on efficiency. Average stock on hand across industries fell to $311,200 in Q3 from $462,735 in Q2. Purchasing of raw materials also declined sharply, down 34.9 per cent to $339,371, reinforcing the shift towards disciplined, data-driven inventory control.
“The sheer velocity of the Q3 pivot is remarkable,” added Adam. “Lead times down 36 per cent, stock down 33 per cent, purchasing down 35 per cent, yet margins up nearly 4 percentage points. This is what disciplined inventory management looks like when manufacturers have real time data and the confidence to act on it.”
“It’s 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,” said Tim Deane, owner at Norsewear, a New Zealand clothing manufacturer that markets across Australia and New Zealand. “We need a sector-wide strategy to lower energy costs and better implement the use of technology to improve productivity.”
The report is based on data from over 1,000 Australian small and mid-sized manufacturers using Unleashed across categories including clothing and fashion.
Fibre2Fashion News Desk (SG)
