ATMI-GOERS EXPECTING A COMEBACK
Byline: Stuart Chirls
SCOTTSDALE, Ariz. — Is the apparel textile market coming to life?
While fabric suppliers have yet to feel the impact of improving retail sales, executives at the American Textile Manufacturers Institute’s annual meeting here, which began Thursday and concluded Saturday, expect an industry-wide revival in the second half of the year.
“We are just beginning to see some oxygen in the market,” said Fred Baumgarten, president, Majestic Mills. “In particular, dresses are good right now, and we are starting to feel an improvement from that segment of the market.”
“After the so-so results we’ve seen, I think everyone expects that business will pick up through the end of the year,” said John C. Adams, chairman, president and chief executive officer of Russell Corp.
The parley took a political twist when Sen. Jesse Helms told the ATMI’s political action committee that he had enough votes to defeat President Clinton’s anticipated extension of China’s Most Favored Nation trading status, according to people who attended the fund-raiser, which was closed to the press.
While the ATMI has its beefs with China, particularly in its transshipping of goods into the U.S., more pragmatic members of the ATMI said Helms’s strategy would serve as little more than a temporary delay in the renewal of MFN.
“The U.S. has far too much at stake in China,” offered Dick Doidge-Harrison, president of Courtaulds Fibers’ rayon division. “Hewlett-Packard is in there; Caterpillar is in there. You’re talking about major corporations and millions of dollars in productions. Just imagine the damage to the American GDP if that had to be scrapped.”
Reflecting the importance of trade with China, Nicholas Hahn, executive director of Cotton Inc., who noted that China was one of the key customers for domestic cotton growers. “Consumption is very strong. China uses all the cotton it can grow and it still has to buy more,” Hahn said.
In Washington, several sources saw Helms’s assessment that the Senate could vote to deny China MFN as an overstatement. While China’s trade status is in “bigger trouble than anyone thinks in the Senate,” a Democratic Senate aide said Monday, there is less than a 50 percent chance that the Senate will deny MFN. “Helms is not a great vote counter,” the aide said.
The National Retail Federation, which has made protecting China’s trade status its top priority this year, is initially focusing its lobbying efforts on the House, where the first vote will be, said Robert Hall, NRF vice president, government affairs counsel. Last week retail officials and representatives met with 10 House Republicans and two Democrats to discuss MFN.
“Helms’s numbers are surprising and I would even call them wishful thinking,” Hall said. “There are a number of leading senators who have strong concerns regarding the actions by the Chinese who still plan to support MFN.”
Meanwhile, Helms also told the executives that the ambassador appointment of chief textile negotiator Rita Hayes was all but assured. The appointment has been held up in Congress at the insistence of importers, who want to air their gripes on administration policy on such matters as the rule of origin change for apparel imports.
And while the changing political winds buffeted the ATMI conference, the primary topic of conversation continued to be business, and the prospects for a turnaround.
Stung by false starts of the recent past, most executives were circumspect in their assessments of the current market, although the outlook for the rest of 1996 was decidedly more optimistic.
“People are still smarting from the same situations in previous years,” said Don Matheson, former executive vice president of manufacturing, Forstmann & Co. “There were quite a few mills that took large positions back then, and they just can’t afford to do that this time around.”
Fiber producers who passed on raw materials price hikes to textile mills throughout much of 1995 were taking a wait-and-see attitude. “Last year was very tough, no question, so it’s going to be some time before a genuine improvement is underway and people are ready to commit to that,” said Doidge-Harrison of Courtaulds.
Cost-cutting remains a top priority at DuPont fibers, which will trim $130 million from its operating budget over the next two years, according to Ned Jackson, senior vice president of DuPont’s Dacron polyester operations. “Within the next five years, we’ll have cut the cost-equivalent of 950 jobs,” Jackson said.
More than a few executives pointed out that recent positive retail numbers could be attributed to annual seasonal improvements, a clearing out of inventory at overstocked stores, or a combination of both. Even when stockrooms are cleared, they observed, the changing nature of the supply pipeline could make it more difficult to determine exactly when to gear up for the revival.
“In many cases, replenishment has replaced seasonality,’ observed Richard Phelan, senior vice president of Chemical Bank, “particularly at large retailers who specialize in basics. That has made it harder to get an accurate picture of the inventory/order ratio.”
Nevertheless, attendees felt that consumers would be back in stores, buying at full-price, in the coming months. “There’s an aspect to women’s buying that has more to do with fashion than price,” said Bernard Leventhal, executive vice president of Burlington Industries. “They are concerned with what’s in fashion, they want us to give them new and different styles, not the same old basics they’ve been buying anywhere. And because the fashions change, they are more concerned with getting it as soon as they can.”
Burlington recently restructured its apparel fabrics operations to reflect a steady increase in its women’s business.
“Retailers can put off ordering for just so long,” said Ray Jeffcoat, a director of Johnston Industries. “I think the cycles of the business will bring it back the rest of the year, and everyone will have an improved year.”
Jeffcoat claimed Johnston was seeing strong orders despite a freakish setback late last year, when the December fire at Malden Mills scotched a 20 million-yard fabric order Johnston had signed with the mill just a week before.