BURLINGTON’S HENDERSON SEES PROFIT IN FASHION FABRICS, QUICK DECISIONS
Byline: Michael McNamara
NEW YORK — George Henderson 3rd’s plan for Burlington Industries can be summed up in two words: “speed” and “fashion.”
Henderson, 46, who has been president of the $2.1 billion textile giant since 1993, added the chief executive officer title in January, succeeding Frank Greenberg, who continues as chairman.
Burlington’s agenda for serving the apparel market is to focus on the domestic production of high fashion, value-added fabrics, Henderson stressed in an interview during a recent visit to the firm’s New York offices.
To heighten the fashion positioning for Burlington’s apparel fabrics segment, which in 1994 generated $1.3 billion in sales, Henderson said the company is:
Furthering the process of what he calls “cleaning up problem areas.” In apparel fabrics, the segment in need of improvement is Burlington Knitted Fabrics, a division that contributed mightily to the 23.9 percent drop in operating earnings in 1994 to $151.5 million from $199.2 million. Sales of Burlington Knitted Fabrics are estimated at between $125 million and $150 million.
Continuing the corporate investment of about $100 million per year to expand capacity and add specialized capabilities for all its apparel segments: Burlington Knitted Fabrics; Burlington Denim; Burlington-Klopman, and Burlington Menswear.
Enhancing its export business, which increased 32 percent in 1994 to $131 million company-wide.
However, due to rising raw materials prices that have hit virtually every fiber, Henderson said it’s going to take more creativity and versatility than ever before to get those products to the market and maintain sufficient margins. Reflecting pressures on apparel manufacturers from retailers, the market, he said, is not accepting price increases of the magnitude to cover the hikes in raw material costs.
“It’s not easy,” said Henderson. “Over the last four months we have looked at every job in the company and eliminated what was not essential. But there is only so much we can do.
“Raw materials are 30 percent of our total costs,” added Henderson. “We have to find ways to ease that pain. It may be something we do with blend levels, weights or even new products. If our customer isn’t successful, we aren’t going to be successful.”
Henderson said that five years ago, Burlington categorized its businesses into two segments: “A” businesses, which were profitable, thriving pieces of Burlington, and “B” businesses, those areas that demanded attention and needed revamping.
“In 1990, those ‘B’ businesses represented 23 percent of our sales,” Henderson said. “Today, they represent 7 percent. Knits are still a ‘B’ business, but the personnel and cost-cutting moves we’ve made have the division on the right track.”
In September, Charles Cole was named president of Burlington Knitted Fabrics, replacing John Weingarten, who left the company. Then, in December, Burlington eliminated the weekend shifts at its Denton, N.C., plant, which had been identified as its most inefficient knit facility. About 170 of the 875 plant jobs were cut. The firm’s four other knit plants in North Carolina were not affected.
The division has also consolidated its New York sales and marketing offices, moving management, marketing and product development to its Greensboro, N.C., headquarters. Merchandising and sales, however, remain in New York.
“The problem with the knit business has been largely our own problem, not running the business operationally the way we should have,” Henderson said. “We have a lot of areas in the knit business that are positive. But it’s the tail part of the business, the seconds, closeouts and filler goods that we’ve been losing money on.”
Henderson said for knits to regain profitability, it’s imperative to “chop off that tail. That’s what’s pulling us into the red.”
“We’re going to focus on value-added type products and not commodity items that are driven by price,” said Henderson. “Of course we have begun to reduce costs, trying to make the division more efficient. I believe that will help us improve margins.”
Henderson also said the $100 million a year Burlington reinvests into the company in the future “will be for smaller, more flexible equipment that has the ability to communicate with other pieces of equipment we have.”
Henderson said the key to future investments will be doing things that can help the company react more quickly in the market.
“It’s not that the equipment has taken so long to respond. It’s the decisions that have taken so long,” said Henderson. “We need to streamline that.”
Henderson was quick to point out that Burlington’s capital expenditures will be aimed at supporting core businesses, and that for the foreseeable future, all money will be spent for domestic production.
“Our bias is to continue to manufacture most of what we make in the U.S,” said Henderson. “If we were in the commodity fabric business, then we would look at other parts of the world.
“If we do commodity fabrics, then we have to reach a decision as to where those things would be made,” Henderson said. “Right now, however, we have plenty of opportunities to grow in this marketplace.”
While Burlington’s production will be focused in the U.S., a key part of its marketing plans includes exporting. Henderson said value-added, one-of-a-kind products can be successfully sold overseas.
One such product Burlington is banking on is Esenzia, a group of Italian-inspired fabrics from the company’s men’s wear division, of which Burlington Ms. is a part. The line, a collection of worsted products, “is an example of what Burlington is doing to create better fashion products,” said Alex Neely, president of Burlington Menswear.
“They’re fabrics that designers including Joseph Abboud, Donna Karan and Anne Klein have taken a huge interest in, and they represent our commitment to better fabrics,” Neely said.
Henderson said Burlington also is seeing increased overseas sales in its Burlington Denim division.
Henderson, who joined Burlington in 1974, and whose father was a salesman with the company for 35 years, said, “We’re trying to change the culture more and more here. We are emphasizing openness within the company and in our dealings with customers. It’s extremely important to have more exchanges of ideas because decisions have to be made closer to the market.”