NEW YORK — When VF Corp. reported its 23.8 percent increase in net income Thursday, the company credited its aggressive moves to close domestic plants and shift to contract foreign production as helping improve margins markedly.
This story first appeared in the October 21, 2002 issue of WWD. Subscribe Today.
The success convinced company officials to close a further five domestic plants, at a cost of 3,000 jobs, a spokeswoman for the Greensboro, N.C.-based company acknowledged Friday.
“We’ve seen the efficiencies in our offshore manufacturing plants be better than expected,” she said. “Since we’re doing better than anticipated, we took the opportunity to be more aggressive in our continued move offshore. Our program has not changed, we have just accelerated some of the movement.”
The five additional plants to be closed are in Woodstock and Luray, Va., Coalgate and Okemah, Okla., and Lebanon, Mo. The company also has two plants in El Paso, Tex., left to close as part of the first round. All the facilities manufacture jeans. VF informed employees at the plants of its decision late Thursday.
As reported, last fall VF kicked off a major restructuring program that entailed closing 30 to 35 plants and laying off 13,000 workers, as part of an effort to reduce its reliance on domestic company-owned manufacturing plants. When it began the cutbacks, the company produced 25 percent of all the merchandise it sold at its U.S. facilities. The five plant closings revealed Friday come in addition to the previously reported closings.
The initial round of closings reduced that figure to 15 percent and this round, which is to be completed by May, will reduce the number to 10 percent, the spokeswoman said. Last year’s cuts reduced the firm’s workforce by 18 percent, which would have left the company’s workforce somewhat below 60,000 worldwide.
The spokeswoman did not provide an estimate of what VF’s domestic payroll would be after the latest cuts. She added that the company does not anticipate making further significant cutbacks in its U.S. manufacturing base.
“There is some amount of domestic manufacturing capacity that we want to keep because we are known for our flow-replenishment and quick-turn service capabilities,” she said. “This brings us close to what the optimal number is going to be.”
The company had said it expected restructuring costs to reduce 2002 net earnings by about 20 cents per share. These closings will not increase that figure, the spokeswoman noted. Through the first nine months of the year, the company has recorded $3.6 million in restructuring charges, lowering results by about 2 cents per share.
As reported, in the first nine months of 2002, the company recorded a net loss of $231.1 million, which includes a $527.3 million goodwill write-off and is the equivalent of a $2.20 loss per diluted share. Nine-month sales were $3.77 billion, off 5.4 percent from a year earlier, when the company earned $250.5 million, or $2.17 a diluted share.
The spokeswoman said the cost-cutting steps were a necessity, given the current business environment.
“The economy is weak, consumer confidence is at a 10-year low, apparel prices continue to be under pressure,” she said. “We’re doing our best to plan conservatively for next year. We just need to be aggressive in this area.”