“”””EXECS SEE SIGNS OF BETTER DAYS
Byline: Michael McNamara
NEW YORK — It has to get better.
That’s the refrain of many in the textile industry, whose executives said a sluggish retail climate, an overabundance of products in the pipeline and higher raw material costs combined to help make 1995 one of the poorest years overall that they can recall.
The last 12 months have been replete with employee layoffs, plant shutdowns and division closings at many leading textile firms.
Among the dismal performers in 1995 have been commodity fabrics, printed apparel fabrics and several areas of circular knit fabrics, including robewear and swimwear. They also expressed their concern that increased sales of hard goods may diminish the soft goods share of the consumer dollar.
But while many textile executives are looking for more of the same in the early part of 1996, they said a combination of a stronger economy, a cleaning out of inventory at retail and a more efficient fiber and fabric market could lead to an overall market improvement by early March.
Among the factors that are shaping next year’s outlook:
* Raw material price hikes, which have overrun the market in the last 20 months, have subsided. Polyester, which climbed to slightly less than $1 a pound by late summer, has stayed there for a few months, while cotton hovers in the range of 83 to 87 cents a pound after reaching a high of $1.21 a pound mill-delivered in June.
* Novelty fabrics — in knits and wovens — are allowing textile companies to get into niche markets. Denim, while leveling off in popularity, is doing so at an extremely high level.
* Textile and apparel exports for the first three quarters of 1995 reached $10.2 billion, a 16.4 percent increase over the same period last year, as more firms appear to be taking seriously the warning sounded by industry experts: “Export or die.” Textile exports were $5.4 billion; apparel exports hit $4.8 billion.
* For the first three quarters of this year, Commerce Department figures show that 80 percent of the fast-growing import shipments of apparel from Mexico was assembled from U.S.-made fabric.
* Despite mill fiber consumption falling 3 percent to 3.9 billion pounds in the third quarter because of a strong first quarter, mill consumption for the first three quarters combined to reach 12.1 billion pounds, remaining marginally ahead of the January-September 1994 period.
* Cotton and polyester, the two leading apparel fibers, continue to gain strength, increasing their share in more product areas.
“U.S. makers have been making great strides to increase our share of foreign markets, and we are pleased with the export growth that we have experienced so far,” said Walter Y. Elisha, chairman of Springs Industries and president of the American Textile Manufacturers Institute. Elisha is one of the industry’s strongest proponents of the need to export. “While the industry is struggling in many spots, the third-quarter export statistics are further evidence that the North American Free Trade Agreement is benefiting our industry.”
Elisha, interviewed from Springs’ Fort Mill, S.C., headquarters, went on to say, “The fact that exports of U.S.-made textiles and apparel are increasing at faster rates than imports is a positive sign for the future.”
Man-made fiber producers said their industry is looking at full capacity production some time late in the first quarter. The big run-up in raw material costs appears to have leveled off, although they remain much higher than a year ago. Most fiber producers said the price hikes they’ve passed on to their customers have subsided, at least for the time being.
Wool prices, too, have softened since reaching $2.92 a pound in March and now are about $2.05. While domestic mills may benefit, Australian wool growers, who were hampered by low wool prices two years ago, are struggling again.
Mills and converters are also predicting business will improve early next year, although much depends on how retail fares — especially this year’s holiday selling season.
Here’s the outlook for some key industry segments.
The fiber industry — particularly polyester and nylon, two of the fibers hardest hit by price increases over the last 18 months — could see significant growth in 1996. However, much of that growth could come through industrial, home fashions and automotive applications.
“Based on our data, I would say that the industry is looking at a drawdown in inventory,” said John Anderson, vice president of marketing for the fibers division of Wellman Inc. “We would expect full [capacity production] to come sometime in the first quarter.” Anderson said, “Our overview is that the economy is strong, and a couple of real positives are that unemployment is in good shape and interest rates are low.
“We would expect industrial, home fashions and automotive to be strong, but apparel is a bit cloudier,” Anderson said. “We look for the apparel segment for us to grow only about 1.5 to 2 percent versus a 7 percent overall growth.”
Anderson said that Wellman, a leader in recycled polyester, could gain in the high tech, outdoor apparel market.
Jerald Blumberg, the DuPont senior vice president overseeing the company’s $6.8 billion fibers business, said he also sees 1996 as a mixed bag.
“The momentum just isn’t there yet,” he said.
Cost-cutting measures, including improved quality control and streamlining operations throughout the entire fibers business, have “helped and will continue to do so,” Blumberg said.
Polyester demand, said Blumberg, continues to be slowed by Chinese mills, which have not been buying polyester staple at the same rate as a year ago. However, the increased acceptance of polyester in better segments of apparel “continues to help,” he said.
William B. Harris, president of Hoechst’s worldwide fibers business, said that while he’s an optimist, “It’s very hard to find things that point to business getting better.”
“I don’t think business will be nearly as good as it was in the first half of 1995, but I do think the total of 1996 will be better than the second half of 1995 annualized,” Harris said. “Our challenge in polyester business continues to be to improve performance staple business. We’ve been doing better, but we’re still short of where we want to be.”
As for polyester prices, which have gone from the mid 60-cent range to almost $1 in the last year and a half, Harris said that most people “don’t expect them to rise and, if anything, they may trend downward.”
“While polyester prices haven’t yet fallen, I don’t expect them to increase in 1996,” Harris said. “What we and our customers prefer is price stability.”
One executive whose mill is a big user of polyester said he agrees with Harris’ assessment.
“I see the price of polyester peaking very shortly, and then we’ll see it go the other way,” said Howard Ackerman, chief operating officer of Malden Mills. “Not everyone believes it’s going to happen, but because more polyester raw material capacity is coming on stream, sometime in late 1996 into 1997 raw material supply will overrun demand, and those prices will come down.”
After a year of consolidations and joint ventures — and, of course, price increases — the key nylon producers — DuPont, BASF and AlliedSignal — all said 1996 should be a better year.
“We’ve had a year of transition,” said Charles L. Kale, BASF’s business director of nylon textile products. “We consolidated manufacturing in Anderson, S.C., restructured the hosiery business and have focused on a new product mix. I think next year, those efforts will really show in a big way.
“Our plan through 2000 is to continue to improve our marketing efforts and product mix, and we’re going to invest capital, mainly to modernize the Anderson facility,” Kale said
Kale said BASF should feel the benefits of the consolidation: “We are stressed with inventory. Our capacity allows us to shift production very easily from product to product.”
DuPont said it is banking on several joint ventures in nylon — most notably in South America, China and Taiwan — to push that business forward.
“Everything you do has to be done with a global idea in mind,” Blumberg said. “Our future, and the industry’s future in nylon, looks pretty good.
AlliedSignal said it will continue to gear most of its 1996 production to the apparel market, “which is one of the few bright spots right now,” said a mill executive.
Another category where prices have leveled somewhat is rayon.
“The demand for rayon this year — at best — has been flat,” said Doug Noble, vice president of marketing and sales for Lenzing Rayon Corp. “Yet, in spite of rising rayon imports in yarn and fabric, our volume has been fairly stable. Pricing has been the problem, due to the raw material increases from our suppliers. Plus our customers have been squeezed between the retailer and these higher prices.”
Noble said he expects an uptick in the rayon market “sometime in early 1996.”
He points to an expected improvement in the Chinese cotton crop next year, “which will mean less production of rayon yarns and fabrics there, which were used as a substitute for cotton.” This means that demand for domestic-made rayon fabrics and apparel could get a boost.
“We feel there are positive signs, such as inventories being reduced,” said Dick Doidge-Harrison, president of the rayon business at Courtaulds Fibers. “Prices seem to have leveled out, but we were very surprised at the rate at which prices went up.
“Our concern remains the retailer, which is still not accepting price increases,” Harrison said.
Acrylic is another fiber that’s gone through a mediocre year, primarily because of higher prices. However executives at both of the domestic acrylic makers said a more expansive market will hopefully drive the category in 1996.
“This year has been like having one foot in the fire and one foot in the ice,” said David Lyttle, director of market development at Cytec Industries. Lyttle said that bright spots for acrylic this year have included pile fabrics, blankets, home furnishings and the crafts and nonwovens areas.
“Where it has been lousy is knit outerwear, sweaters and some hosiery applications,” Lyttle said.
Monsanto’s said it will continue to work closely with retailers for its DuraSpun and SnoBrite products and anticipates significant gains next year.
“The market is poised, inventories are low and people want products,” said one fashion executive whose firm is a big user of acrylic.
In spandex, the news continues to be the attempted market penetration by the two smaller players on the block, Bayer and Globe Manufacturing. Both are trying to become the number-two domestic player, behind DuPont and its dominant Lycra spandex, which controls about 80 percent of the U.S. spandex market.
Bayer, which started producing its Dorlastan spandex in the U.S. this year, is looking to gain 12 to 15 percent of the total spandex volume here.
“Right now, it’s a challenge,” said James Heslep 3rd, vice president, marketing, Dorlastan. “The circular knit market appears to be weak, but the overall market looks strong. I think the circular knit market will pick up because everyone seems to be making knits with a fashion component.”
Globe, which added 4 million pounds of spandex production at its Tuscaloosa, Ala., plant, “is working to find niches where we can get some success,” said Bob Bailey, vice president of marketing at Globe. “Hosiery, swimwear, activewear and ready-to-wear are all categories we’re targeting in 1996.”
The Naturals: Cotton and Wool.
Cotton and wool are looking toward casual dressing as one area to help increase share, especially on an international level.
“Casual dressing continues to be bullish for us,” said J. Nicholas Hahn, president and chief executive officer of Cotton Incorporated, the research and promotion arm of U.S. cotton growers. “But it’s especially encouraging to see how the casual dressing idea is increasing in an area such as Japan. There has been no other nation that has been as conservative as Japan, but now men there are wearing more casual cotton shirts or pants to work with a blazer.”
For cotton, the volatile price situation that dominated late 1994 and early 1995 has eased. For three months, prices have hovered in the range of 84 to 93 cents.
The most recent crop, for the year ended July 31, was a “very good” one, said Hahn, “although because of some insect problems it came in under the original projection of 21.5 million bales.”
The USDA’s latest estimate on that crop is slightly under 19 million bales. The output is the second-highest ever, topped only by the previous year’s production of 19.2 million bales.
“Prices continue to remain firm and pretty stable, and that’s attributable to the continued strong demand for cotton by domestic mills as well as a strong export market,” Hahn said.
China, said Hahn, continues to be a key factor, as it is the second-largest grower. With a better crop predicted there this year, as well as an improvement in the Indian and Pakistani crop, “it will help to meet worldwide demand,” Hahn said.
“While retail sales here have not been great, cotton’s share of what business there is continues to grow.”
Based on figures from consumer market research firm NPD, cotton’s share at retail in apparel on the basis of fabric weight is 58 percent, up from 57 percent last year.
In addition to casual dressing, women’s wear will continue to be a focus for cotton in 1996, especially in blouses, dresses and sportswear.
As for wool, lighter weight “seasonless wool,” will be the catalyst in 1996,” said Wilbur (Pete) Peter, director Americas of the Wool Bureau, the North American arm of the International Wool Secretariat.
“We’re working to get wool in lighter, natural blends with silk, linen and cotton,” said Peter. “We’re saying that you can still dress casual but with a more upscale look.”
“Retail is putting pressure on opening and low-moderate areas,” Peter said. “Retailers who are concentrating on the development of unique product and upper moderate and bridge are doing well. The better customer is very much alive. They obviously want value, but it’s not just price.”
In the vein of emphasizing value-added products, Peter cited the recently introduced Wool Plus Lycra program into which the IWS entered with DuPont to market better wool fabrics with spandex. The program highlights stretch and new draping qualities for wool fabrics.
Burlington Industries and Anglo Fabrics are working on developing wool products with Lycra. “And it’s something new to get into the market,” Peter said.
“We want to increase the use of wool for spring,” Peter said. “Year-round weights for wool are going to be where the surge in business will come from.”
Peter did say that one potential challenge for wool continues to be the low price, which is hurting the growers.
“However, we think there will be dramatic increase in consumption because of price points, and that will ultimately lead to a shortage of product,” Peter said.
Mills and Converters
On the mill front, executives said the increase in demand for novelty knits, including better fleece, and the fact that many mills continue to invest in productivity bode well.
“I think the first part of 1996 will show gradual improvement over 1995, starting in the first quarter,” said Arthur Wiener, chairman and chief executive officer of Galey & Lord, which, as reported, is in the midst of acquiring Graniteville Co., a maker of denim and uniform fabrics. Upon completion of the acquisition, the new company will have apparel fabric sales in excess of $1 billion. However, some see the many shakeouts of 1995 continuing into 1996.
“I think what we’re seeing now is necessary,” said John Cavanagh, president of CMI Industries. “There’s too much commodity production going on, and as long as you have that, mills and converters are going to suffer.”
Among the casualties in 1995: l The printed fabrics business of Lida, Galey & Lord and Folio.
Plant closings by Andrex Industries and Concord Fabrics.
l A drop-off in employment. According to government figures, employment in the textile industry stood at roughly 644,000 in October, unchanged from September, but 30,000 — or 4.4 percent — less than October 1994. The average workweek in textile mills stood at 40.4 hours, 1.4 hours less than in October 1994.
“Bankruptcies and closings are keeping more inventory in the market and are making the situation a negative one,” said Ed Moskowitz, president of Fabrictex, a circular knitter here.
Alfred Greenblatt, president of the apparel and home fashions business unit of Guilford Mills, said, “I’m expecting apparel ups and downs in terms of different markets.”
Greenblatt said he’s expecting growth in stretch fabrics, especially in intimate apparel, and in novelty circular knits with spandex. Greenblatt also said that with the recent purchase of Hofmann Laces, Guilford will be a bigger supplier of lace fabrics to the intimate apparel market.
“In some of the other businesses, I’m concerned — especially commodity products,” Greenblatt said. “We’re going to focus on proprietary products with a big emphasis on exports, perhaps as much as a 20 percent increase next year.
“As the years unfold, proprietary products are the only way American firms can exist,” said Greenblatt. “We have to be quick and have the fashion and design people want. There will always be someone who can make fabric cheaper or a garment cheaper.”
“On balance, I’m fairly optimistic,” said George Henderson 3rd, president and chief executive officer of Burlington Industries. “Yet it will still be a tremendous challenge. People continue to be selective in many things they buy, and clothes right now don’t seem to be a part of that mix.
“Our big success story continues to be denim, and that’s a category that’s done well with virtually every other mill,” Henderson said.
As for the converters, they’re all scrambling to generate any business at all. Most are adding new products to their mix to help offset lagging printed fabric sales. (For more on prints, see page 18.)
Omega, Tandler Textile, Metro Fabrics and JBJ have added coordinated solid fabrics to go along with their print lineups.