By  on June 28, 1994

NEW YORK -- "Happy days are here again -- for some, if not most, knitters."

That's how Jay Meltzer, a vice president in Goldman Sachs's equity research department, sized up the domestic knit business last Wednesday at an economic forecast seminar sponsored by the Knitted Textile Association. About 75 executives attended the breakfast meeting at Butler's Restaurant here.

Citing increased orders, improved margins and better prices as the foundation for enhanced business, Meltzer said the second quarter looks like the beginning of a good run for U.S. knitters.

"Cautious optimism has replaced pessimism, just the reverse of a year ago, or even six months ago," Meltzer said. "It seems increasingly likely that the industry's dismal first quarter probably marked the end of a lengthy decline."

Meltzer also pointed to lower inventories at both the manufacturing and retail level, along with increased fiber shipments, as helping. Domestic noncellulosic fiber shipments this year, Meltzer said, are up 6.4 percent.

"Just as important," he added, "inventories at most fiber producers remain under tight control."

The executive also singled out the trend toward casualwear as a good sign for the knitters.

"With these items, lead times continue to shorten and Quick Response pressures accelerate," Meltzer said. "This is bad for long-lead-time suppliers, but good for short-cycle, quick-turn, knitted fabric producers."

Still, Meltzer warned the knitters not to get too giddy. There's no guarantee that problems that have plagued knitters over the last few years won't return, he said.

"The dreaded multi-eyed monster -- inventories, imports and inadequate return on investments" -- could prove problematic, Meltzer said. "This business is built on the principle of supply and demand. If one gets too far out of kilter, business suffers."

The retail front was the topic of another speaker, Ed Johnson, director of Johnson Redbook Service. He told the knitters that the upcoming Christmas season should be better for the apparel industry than last year, when hard goods dominated the gift scene. Overall, Johnson predicted a 7 percent sales gain for the retail holiday season.

Meltzer told the knitters that they aren't taking advantage of export opportunities. That, he said, could hamper industry growth. Meltzer said that the majority of domestic knitters should derive at least 10 percent of their sales through exports."Too many companies don't look to exporting," he told them. "U.S. knitters are the best in the world. There are opportunities all over the place."

Meltzer said the North American Free Trade Agreement has opened up the whole of North America, while Europe also represents a prime export target.

Interviewed after the discussion, Ellen Green, vice president of Andrex Industries and president of the KTA, said the association has formed an export committee to "study options on exporting."

Although she wouldn't divulge the names of the eight member firms on the committee, Green did say the group "has met a few times and is looking at several programs. It's too early, however, to go into specifics."

After the meeting, Meltzer warned that the rising cost of raw materials, most notably cotton, could be a problem for knitters.

"Never a day goes by without a call from someone worried about the adverse effect of escalating raw materials cost on margins, profits and demand," said Meltzer. U.S. cotton is currently selling at about 83 cents per pound, 50 percent higher than a year ago.

"But I am not dismayed," he said. "Cotton's dramatically higher price has induced farmers all over the world to put additional acreage under cultivation. If a substantially bigger crop is harvested next year, as we suspect, some price relief may be forthcoming."

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