VF Corp. officials expect 2002 to be another tough year for the apparel industry.
In a conference call with analysts Wednesday morning, chairman and chief executive officer Mackey McDonald said the company expects its earnings this year, excluding restructuring charges, to be flat with last year’s numbers and overall sales to be down about 4 percent.
He said he expects retail spending to remain soft, but added: “We hope that any improvement in the economy will translate into strong sales growth at retail.”
However, with the economy still struggling and consumers increasingly focused on bargains, John Schamberger, chairman of the company’s jeanswear coalition, said VF plans to cut its prices on jeans to better compete with private label merchandise, particularly in the mass market.
“Value continues to be a key driver, and we’re seeing price deflation at the retail and wholesale levels,” he said. “The growth of private label lines in the mass stores is a challenge.”
The Rustler, Wrangler, Riders and Lee brands will all consider price cuts, he said. The reductions will not be an across-the-board percentage but based on competition at particular stores and in particular market segments.
Terry Lay, chairman of the company’s international jeanswear coalition, reported that business has been better overseas.
“The international jeans business is performing strongly,” he said. “We expect good growth in Europe.”
He added that the company plans to roll out new high-end Lee jeans in Europe this year.
As reported, VF Corp. late Tuesday released its fourth-quarter financial results. The Greensboro, N.C.-based company recorded a $112.6 million net loss, which included a $236.8 million restructuring charge. The results were slightly ahead of Wall Street’s expectations.
The charge was related to VF’s previously disclosed plans to cut 13,000 jobs worldwide, close about a fifth of its plants and shift more production to low-cost contractors in other countries.
Company officials said on the call that about $25 million to $30 million in charges related to the restructuring would likely be included in the results of upcoming quarters.
McDonald noted that the company’s intense focus on reducing inventories paid off in spades: It closed the year on Dec. 29 with $200 million less in merchandise than it had on hand a year earlier. The firm’s original target had been to cut inventories by $100 million.
Inventory buildup became a problem for many apparel resources in late 2000 and early 2001 after the economy’s quick slowdown following years of explosive growth. Industry observers today are hoping that vendor and retailer efforts to cut inventories aggressively mean the trade is poised to benefit quickly from any turnaround in consumer spending.
Schamberger added that in the U.S., Chic jeans will be introducing new styles to cater to older customers.
Executives at the firm’s five coalitions said they planned to increase their spending on marketing this year in an effort to gain market share while overall apparel sales are soft.
McDonald added that the company’s financial targets are based on a presumption that bankrupt Kmart Corp., one of VF’s major customers, will close stores this year.
“We’ve assumed they’re going to close a significant number of stores,” he said.
Mixed Checks for Denim Execs
Top executives at two major denim mills that ended last year in the red saw different trends in their paychecks.
New York-based Galey & Lord Inc. opted not to award bonuses to its five highest-paid executives after recording a $70.1 million loss for the year ended Sept. 29. That loss compared with a $38.3 million loss the year earlier.
For chairman, president and chief executive officer Arthur Wiener, that meant his combined salary, bonus and other cash compensation dropped 46.5 percent, to $700,008 from $1.3 million, according to a recent filing with the Securities and Exchange Commission. John Heldrich, executive vice president and president of the mill’s Swift Denim division, also saw his compensation nearly halved, to $450,000 from $888,750.
The compensation committee report in the filing said bonus “performance criteria are based upon the company achieving measurable performance goals in a participant’s principal area of responsibility.”
The filing also showed that Wiener’s stake in the company has dropped substantially over the past year, from almost 1.2 million shares — or 9.4 percent of all outstanding stock — to 666,1000 — or 5.5 percent. That still leaves him the largest individual shareholder of the firm, of which Citicorp Venture Capital Ltd. owns 46.8 percent.
The story was different at Burlington Industries Inc., after the bankrupt company decided to pay retention bonuses to its top-five officials.
Chairman and ceo George Henderson’s compensation popped up 42.9 percent, to $857,250, after the company raised last year’s $600,000 base salary by $30,000 and paid him a $227,250 bonus.
President and chief operating officer Douglas McGregor’s compensation more than doubled in his first full year on the job. His salary and bonus for the year ended Sept. 29 was $716,500. That compares to total cash compensation of $357,813 the year earlier. He joined Burlington on June 1, 2000.
The company also awarded bonuses to its three other top-paid executives. Only one of Burlington’s top officials, James McCallum, the president of the carpet division, had been paid a bonus in fiscal 2000.
The company said in an SEC filing that after filing for Chapter 11 bankruptcy court protection on Nov. 15, it adopted a “key employee-retention plan.”
“Key components of the plan include stay bonuses for certain employees, compensation payments for severance and change of control events, bonus payments if the company emerges from Chapter 11 and a discretionary fund that would be available for use by the chief executive for employee incentives during the Chapter 11 cases,” the filing said. “The purpose of the plan is to provide the incentives necessary for the company to retain its management team and other key employees.”
In fiscal 2001, Burlington recorded a $91.1 million loss, compared with a $527 million loss the prior year.
Nautica Parties On
“Sex,” as in “Sex and the City,” and rock ‘n’ roll were on hand Tuesday night as Nautica Jeans Co. celebrated Valentine’s Day and Fashion Week.
John Corbett, who plays Aidan on the popular HBO show, co-hosted the event at The Cutting Room in Manhattan’s Flatiron district. The venue is owned by Corbett’s “Sex” co-star Chris Noth.
Luckily for Corbett, though, Noth wasn’t there to steal any attention from the throngs of women who bum-rushed him throughout the night. David Eigenberg, another co-star, stopped by for a quick drink but didn’t garner quite the same attention.
Nautica Enterprises Inc. chairman and chief executive officer Harvey Sanders said he was pleased with the turnout.
“Originally, we thought there would be 350 people, but it looks closer to 500,” he said. “The ladies’ denim seems to have turned on this year and we’re excited to celebrate during Fashion Week.”
In addition to the regular industry set, dedicated Nautica consumers attended. Nautica gave them tickets for spending more than $50 on Nautica Jeans Co. women’s product at a recent Macy’s Herald Square promotion.
A&M recording artist Vanessa Carlton performed her single “A Thousand Miles Away” and other tracks from her album “Be Not Nobody,” which comes out in March. Elle magazine was another event sponsor.
Nautica executives at the party revealed plans for a fall test of a new women’s sportswear line at the company’s Rockefeller Center flagship for fall, but wouldn’t disclose further details.
Irvine, Calif.-based R&S Trading Co. Inc. is adding another line to its stable of labels for fall.
Extra Fine Sugar, a grown-up version of six-year-old junior brand Sugar, will offer a small collection of jeans, T-shirts and knit tops to make its debut at the WWDMAGIC trade show in Las Vegas, Feb. 19-22.
Each of the four styles of jeans differs in wash and detail, but all are boot-cut with a 6 1/2-inch rise. Also, the jeans are available in 13 3/4-oz. and 10 1/2-oz. rigid denim with a 32- or 34-inch inseam.
Three washes are available, including a dark indigo, a brown antique wash and a lighter bleached denim with brown tint. There is also potassium-baked jeans with blasts of light areas.
Tonal tie-dyed T-shirts in navy, army green and burnt orange are available in addition to the company’s logo T-shirt in khaki. The three rayon-spandex jersey tops are romantic and feminine, according to designer Kim Tyler.
“The Extra Fine Sugar girl is the Sugar girl that’s grown-up and loved wearing the brand five years ago, but wants something more contemporary,” Tyler said.
The jeans wholesale from $40 to $50, with tops ranging from $15 to $25. The line will be manufactured at Gardena, Calif.-based K&K Apparel of domestically made fabric.
Tyler said fall sales estimates for the line are around $500,000. For spring 2003, she plans to double the number of styles and triple the volume. She aims to distribute the line in specialty retailers and department stores.
“For spring, it will be much bigger,” she said. “We’re just testing the water for fall.”
Extra Fine Sugar shoes will make their debut alongside the apparel.