By  on September 19, 1994

NEW YORK -- While some apparel categories are faring well, the hurdles for manufacturers keep growing, and accountants specializing in the soft goods business say a heightened stress on inventory and expense management will be a must for survival.

"Inventory should only be purchased when you know where it is going to go," said Nate Lubow of Mahoney Cohen & Co. He added that because the difficulty lies in determining what inventory needs will be, manufacturers must avoid purchasing on speculation to insure fewer markdowns.

Stephen I. Soble, of Stephen I. Soble & Co., said that several businesses have become increasingly aware of this problem by instituting tighter control. Overall, he said, manufacturers are more conscious of maintaining a healthy relationship between gross profit and overhead costs.

In order to turn inventory as quick as possible, inventory needs must be monitored over time, the accountants said. Soble suggested that manufacturers work out arrangements with suppliers to bring merchandise in as it is needed.

Barry Leif of Rashba & Pokart stressed the need for more cooperation between manufacturers and retailers to help gain the advantages of fast turnover and deliveries.

"Retailers are putting more pressure on their manufacturers while at the same time cutting their markups.

"If an item becomes hot at retail, manufacturers cannot always get enough fabric to capitalize on it," Leif said. His solution lies in better communication between retailers and manufacturers, "who need to cooperate to equalize the flow of production." To keep expenses in line, Lubow advised that companies find ways to reduce costs in significant areas, such as monitoring health-care costs, shopping for better corporate interest rates and cutting sample costs. Sample costs are a particularly difficult challenge for designer firms, he noted.

The accountants agreed that manufacturers need to evaluate ways to minimize personnel by creating better systems for procedures and implementing computers.

To reach the desirable goal of increasing volume with rising overhead, Stanley Sachs, Weinick Sanders & Co., advised that manufacturers make use of outside services, whether they're factoring companies or a growing array of production activities.

"At times like these, apparel manufacturers can draw upon outside professionals in defining management objectives and suggest ways to reduce costs and create more efficiencies," Soble said. To further develop volume, Soble said manufacturers should look to export opportunities."We do a great job of importing, but we need to learn to export to the rest of the world," he said. Stressing the desirability abroad of U.S. labels such as Levi's, he maintained that trade agreements with Eastern Europe, South and Central America, Mexico and Canada will continue to bolster the manufacturing businesses.

Meanwhile, it's pointed out, manufacturers throughout the apparel industry continue to be hit with increased demands from retailers as they push for lower costs, promotional money and chargebacks. While the accountants' views differ as to who's suffering and who's moving ahead, there is general agreement that it's not an easy time.

Citing a significant cut in the number of retailers in the marketplace, Sachs said that business for apparel manufacturers "continues to be very tough."

Larger companies, who maintain strong market positions with low markups, are more stable than their smaller counterparts. Sachs said that it remains questionable as to whether manufacturers with a smaller base will survive.

"Across the board, business for apparel manufacturers is not improving," said Mahoney, Cohen's Lubow. He noted that manufacturers are taking more markdowns and continue to be hurt by buyers aiming to strengthen their margins.

According to Lubow, although some niches are doing better, including casual lower-end apparel manufacturers, no categories are outstanding. He said that lower-priced women's apparel generally is outpacing more expensive lines. Lubow added that stores have allotted less space for better apparel, allowing the moderate-priced and more casual apparel to claim a greater position in the stores.

Leif said that low-end casual categories are also facing resistance.

"Middle-market working women's apparel is holding its own, but not performing as the manufacturers would like it to," Leif added. In Sachs' view, "the budget manufacturers are doing better while others are struggling."

However, Soble contended, "All manufacturers have found resistance in the marketplace." Overall, the market for women's apparel has been more volatile than men's, he added.

-- Fairchild News Service

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