When one of Pakistan’s largest and best known textile exporters announces that it is shutting down apparel exports, one might be tempted to ask why. The country’s financial journalists, LinkedIn influencers, and prolific WhatsApp forwarders, however, are free of such intellectual curiosity. They just assumed: “this is Pakistan, bad things happen here all the time. This must be one of them.”
Shared, bemoaned, moved on.
Except that they did not really understand what happened at all.
We find ourselves in the unusual position of writing a cover story of our magazine on a topic to highlight that it is not important: no, something as monumental as Gul Ahmed Textile Mills – a company that single-handedly generates half a billion dollars of exports for Pakistan – did not suddenly exit the entire export business because they could not make it work.
They exited one of their smallest product lines from exports, and even that, not for local production, just their export markets.
The reasons they gave – coupled with the fact that the company’s announcement made no effort to quantify the effect of the decision – made it sound like a bigger event than it actually is. In reality, apparel exports account for 7.7% of the company’s total revenue, and are among its lowest margin earners, with gross margins as low as 9.9% in 2024, the last year for which the segment was broken out separately in Gul Ahmed’s financial statements.
Contrast that with the 35.7% gross margins the company earns on its retail business, which it operates through the Ideas brand of stores, both physical and online.
Gul Ahmed is among Pakistan’s largest exporters, having had $522 million worth of export sales for financial year 2025, compared with just $140 million in domestic sales. Announcing that it was giving up the entirety of its export business – obviously not what it actually said – would have been a restructuring of its business of monumental proportions, effectively saying it would get rid of nearly 79% of its revenue. The exit is, instead of a business line that is less than 8% of its revenue, so one-tenth less significant.
But though it is not as monumental as one of the country’s largest exporters giving up on exporting, it does nonetheless say something interesting about the evolving nature of business in Pakistan, particularly with respect to geographic concentrations within the labour market.
In this story, we will begin with an overview of Gul Ahmed Textile Mills and their current business, examine how they got where they are today, and then look at why they decided to quit apparel exports, particularly given the fact that some of their exporting peers have been able to make exports their core business.
Gul Ahmed: origins and history
The history of the company starts – as with many Pakistani businesses – with a Gujarati trading family. In this case, it begins with Haji Ali Mohammad, a Gujarati cloth and textile trader who started his career the late 1940s by setting up a bottling affiliate for PepsiCo in Karachi. By 1950, Ali Mohammad, in addition to bottling and distributing Pepsi’s products, was also using the same company – Mehran Bottlers – to manufacture and sell his own brand of soft drink, what we now know as Pakola.
Bolstered by his success as a Pepsi bottler, Haji Ali Mohammad started a textile company in 1953 and named it Gul Ahmed Textiles, which is now arguably one of the best known brands in Pakistani clothing. (Mehran Bottlers is no longer part of the same group.) From the outset, the company sought to go beyond the most basic level of manufacturing cotton yarn and created a vertically integrated textile mill.
That meant it could take ginned cotton and convert it into yarn, take that yarn and weave it into cloth, and then dye, process, and stich that cloth into a finished product.
From a very early point in its history, Gul Ahmed wanted its brand name to be known to the Pakistani consumer, even as it made a substantial portion of its income exporting its products under other people’s brand names to other countries. That level of sophistication is also reflected in the fact that not many trading businesses created incorporated businesses as early as 1953, but Gul Ahmed did. It was one of the first 1,000 companies to be registered in Pakistan after independence.
The company made the decision to go public in 1970, which in hindsight was not ideal timing as the events that would lead up to the 1971 war and Bangladesh’s independence had already begun. And that would then be followed by a left-leaning government suspicious of the profit motive, which effectively meant that for the first decade or so after the company was publicly listed, Pakistan’s capital markets went nowhere.
The company and the group, however, kept on expanding. Throughout the 1980s and 1990s, it kept expanding both its domestic footprint and export network. Its exports were especially helped after the creation of the World Trade Organization in 1995, which allowed Pakistani textile companies to export much more than they had previously been able to due to the pre-WTO quotas that restricted how much each country could export textiles.
The entire 10-year period that coincided with the phased end of the Multifiber Agreement (1995 to 2005) – which was the formal name of the pre-WTO textile export quotas – was one of significant growth for the group. It was during this time, in 2003, that they launched a domestic retail brand called Ideas, meant to offer the rising Pakistani middle class the same quality of goods that the company was exporting outside the country.
In the meantime, as is the case with many Pakistani business families, the family grew big enough that the assets needed to be divided up. Haji Ali Mohammad had two sons, Iqbal and Bashir. Bashir and his children got Gul Ahmed Textile. Iqbal and his offspring got Gul Ahmed Energy. The companies have some dealings with each other, but they are not owned by the same people and are specifically separated as part of a distribution of inheritance.
(This used to not be an important disclaimer to make, but then came the August 2024 drunk driving incident involving a member of the family that owns Gul Ahmed Energy, and it is now necessary in any story about Gul Ahmed Textile to note that the people who own the textile mill are related to, but not the same as, the people who own the energy company.)
What Gul Ahmed sells
Like most textile mills in Pakistan, Gul Ahmed started off as a seller of yarn, though unlikely many others, it kept moving up the value chain. The company still produces yarn to be sold to other textile companies, and has many other product lines as well, but by far its most important is the line called home textile. What are home textiles? Bedding, blankets, towels, table cloths, curtains, bed sheets, etc. Stuff that is made of cloth, used in the home, but not worn on a person.
This is important to understand because this type of product is different from clothing worn by individuals. Specifically, the nature and amount of stitching involved is different – and generally less complex – than the stitching involved in making apparel worn by people.
But we are getting ahead of ourselves. First, let us understand the process by which textiles are made. Briefly, cotton is grown on farms, picked by farmers either by hand or machine, and then sold to cotton ginning mills. Nearly the entirety of Pakistan’s cotton ginning industry is located in South Punjab. Ginning involves removing the cotton seed from the cotton. It is a labour-intensive, low margin business, so even the owners of cotton gins are not particularly rich people.
That ginned cotton is then bought by textile spinning companies, who use spindles to turn that ginned cotton into cotton yarn. The yarn is then woven into cloth, the cloth is then dyed and printed, and after that comes the stitching phase.
This is, again, is a labour intensive part of the process, but it is a bit further up the value chain, so the margins are a little bit better. And here is where a big strategic decision needs to be made by the person who owns a textile factory.
See, textile spinning, weaving, and dyeing are big mechanical processes where large machines run by semi-skilled labourers and engineers do most of the work.
After that, your ability to go further up the value chain involves how many people you can have in a factory literally just sitting at a sewing machine and sewing up the items you are trying to manufacture. And the margins you will earn at this stage are determined by one decision: do you want to earn higher margins by having people sew smaller, more complex stitches, or do you accept lower margins, but potentially higher volumes by doing simpler stiches that you can probably churn out faster?
A bedsheet, for example, involves a small number of straight lines that can be stitched very quickly. A pair of jeans, however, involves pockets, zippers, and curved stiches that can be significantly more complex. Your factory would earn a lot more for the jeans, but it will also take longer. The bedsheet could probably be done in seconds by a skilled labourer.
Historically, Gul Ahmed has been the company that chose the simpler product and made its money on the higher volumes. This, of course, is a strategy that has served the company quite well. Over the past 20 years – since 2005, when the textile barriers to trade completely fell away – the company has grown its export revenue from just $67 million in 2005 to $522 million in 2025, which represents an average growth rate of 10.8% per year in USD terms.
But having achieved that scale, Gul Ahmed then tried to invest in expanding its small but significant apparel manufacturing business. And that appears to have been the move that has not quite worked out and is being reversed. Let us take a look at what could be some of the reasons.
Apparel vs home textiles
We have already discussed the different levels of dexterity and time involved in stitching apparel versus home textiles. What is less appreciated is the margin levels between the two. This is best illustrated with an example.
Gul Ahmed Textile Mills has a consolidated revenue of Rs186 billion during the financial year ending June 30, 2025, which translates to approximately $662 million. This is somewhat less, but comparable in scale to Style Textiles (Pvt) Ltd, which earned revenue of Rs209 billion, or $747 million in 2024, the latest year for which data is available.
But now look at profit margins. Gul Ahmed’s best net profit margin (net income divided by revenue) came in 2022, when it was almost 9%, and more typical years see its net margin at between 3% and 5% of revenue. Style Textiles, meanwhile, routinely has net margins exceeding 20% and in a good year can exceed 25% net margins.
Gul Ahmed’s main product is home textiles. Style’s main product is apparel, particularly sports apparel, for some of the world’s leading brands. The infrastructure at both Gul Ahmed and Style looks quite similar in many ways. But Style is enormously profitable in ways that Gul Ahmed is simply not.
It is natural, then, for Gul Ahmed to see the example of Style – a company that started in 1995 – and think about ways they can emulate its profitability levels, especially given the relative similarity of the infrastructure.
Gul Ahmed has had an apparel business for decades at this point, and Ideas now has lines of apparel products that are comparable in range to Khaadi, arguably the most well developed apparel brand in Pakistan. But producing for the domestic market and the export market are completely different endeavours. In the domestic market, the manufacturer controls when the product is launched, and so if it encounters delays, by virtue of the fact that it controls its own distribution to the customer, it can manage that delay with relatively no real impact.
In the export market, however, the manufacturer does not control the distribution, and is therefore working on somebody else’s timelines, in this case, companies who have expectations that their suppliers can meet very tight deadlines with relatively little warning or notice.
So developing the ability to produce apparel products for export is significantly harder. In theory, Gul Ahmed needed to put together the speed of its home textile export business with the complexity its domestic business can handle. But that is what created the problems.
But before we dive into those problems, let us first make note of what the market thought was happening, and why it was not the right reading of the situation.
Why Gul Ahmed’s announcement was misinterpreted
Here is what Gul Ahmed said in its statement to shareholders on September 29:
“The Board of Directors of Gul Ahmed Textile Mills Limited, in its meeting held on 29-Sep-2025 has resolved to discontinue the business operations of the Company’s Export Apparel Segment. This decision has been taken following a comprehensive strategic review of the segment’s performance and future outlook.
The Export Apparel Segment, being highly labor-intensive, has faced sustained margin pressures due to a combination of internal and external factors. Persistent challenges include intense regional competition, a stronger exchange rate, recent government policy changes (such as the increase in advance turnover tax), rising costs of nominated fabrics, and elevated energy tariffs. Collectively, these factors have significantly undermined the segment’s cost structure and profitability, resulting in continued operational losses.
The strategic closure is expected to positively impact the Company by reducing ongoing losses, lowering borrowing levels, and improving cash flow management. This step will strengthen the Company’s overall financial position and enable greater focus on sustainable growth in its other business areas.
It is clarified that this decision relates solely to the Export Apparel Segment. The Company will continue its operations in other principal segments, including Home Textiles, Spinning, and Weaving, which remain integral to the Company’s long-term growth strategy.”
Note where the word export appears: only next to the name of the business line being shut down. All of the other business lines, including home textiles which is its core export business, do not use the word export in their description. This makes it feel like exports as a whole are shutting down, even though that is not the case.
This is how the market reacted to it as well. There were the usual textile lobby crybabies who talked about this as symbolic of the sector’s difficulties.
But even market participants who should have been a bit more careful in their reading of the notice. AKD textile analyst Usama R Gurmani, for example, was quoted in The Express Tribune as talking about the company’s ability to pivot towards its profitable retail segment, which obviously is not what is happening. The retail expansion is independent of the pivot away from garments and continued focus on home textiles in its export markets.
The labour market explanation
What Gul Ahmed is saying with this move is that even the higher prices each clothing product commands was insufficient to compensate for the longer duration it took its employees to produce the products, thus leading it to think that the investment in the apparel business line was unlikely to pay off.
Part of what could explain the divergence in export performance is simply where the labour is located. Punjab has many more smaller apparel export units than Karachi, and even though Karachi has a few well-established apparel export manufacturers, the city’s labour market offers a lot more opportunities to skilled labourers in the apparel industry compared to Punjab.
