KNIT MAKERS HEAR OF MORE HARD TIMES
Byline: Stuart Chirls
NEW YORK — It was billed as a financial forecast, but for the gathering of knit fabric manufacturers here, it was another hard lesson in Apparel Economics 101.
Excessive apparel inventory, the result of too many stores and too little consumer spending, is causing a ripple effect through the apparel industry pipeline, the analysts said, and with economic indicators pointing down, the textile industry can expect more of the same as 1996 unfolds.
The forecast session last Wednesday was sponsored by the Knitted Textile Association.
“Mills that were operating at 90 percent of capacity in July are now at 80 percent,” said Jack Pickler, first vice president and senior textile and apparel analyst for Prudential Securities. “Production lines are idle one out of every three days.”
Pickler sang a refrain the manufacturers are hearing all too often. “There are 19 square feet of retail space for every person in the country, triple what there was 15 years ago,” he said. “There are stores everywhere. Even when a Nordstrom or Neiman Marcus says a new store is doing great business, it doesn’t mean they’ve added sales. It just means it’s taking sales away from another store in their chains.”
Pickler also said that Prudential studies show consumer demographics softening in the coming years. “Women account for about 70 percent of apparel purchases, but as they hit 55, we found that their apparel buying drops by 20 percent. Our studies show that apparel sales will only be up by 1 percent, in units, per year over the next decade.”
Pickler offered a couple of strategies to help mills cope.
“Knitters have to get closer to retailers,” he asserted. “Retailers, especially with all the private label, are going out and putting their programs together themselves. There’s a big opportunity to do things for the retailer.”
Another opportunity, Pickler observed, is in the production of nontraditional products. Companies such as Malden and Guilford, for example, are looking at home textile applications for knit fabrics.
Those opportunities notwithstanding, Pickler said the industry will continue to contract. “Mergers and acquisitions will accelerate in the near term, like the LBOs of the 1980s,” he said. “You might be surprised by some of the transactions to come.”
Steven Kernkraut, managing director of Bear Stearns, echoed Pickler’s views.
“Retailing is a zero-sum game,” he said. “When one store wins, another loses, big time. A lot of retailers will be out of business in the next few years.”
According to Kernkraut, the Internet will hasten the changes in consumers’ buying habits. “It will also change the way you do business,” he said, although just how remains to be seen, particularly in the textile industry.
Kernkraut similarly advised knitters to “get closer” to retailers. “But not too close,” he warned, “because of all the bankruptcies.”