Byline: Scott Malone

NEW YORK — Boosted by strong sales of denim and corduroy fabric, Galey & Lord Inc. swung back into the black in its first quarter.
The Greensboro, N.C.-based mill reported net income of $70,000 — including run-out charges related to the company’s previously reported moves to relocate some of its denim weaving operations to Mexico and shutter its yarn-spinning operations. That income compares with an $891,000 loss in the prior-year quarter.
Excluding the run-out charges, the company said it would have reported net income of $1.3 million for the three months ended Dec. 30.
Sales for the quarter were $221.7 million, up 10.7 percent.
In a conference call with Wall Street analysts, Arthur Wiener, chairman, president and chief executive officer, pointed out that the sales growth came despite the recent slowdown in retail sales.
“We all know that the retail holiday season fell very short of expectations,” he said. As a result, he continued, the company expects to miss its second-quarter plan for khaki-fabric sales, as its customers reduce their inventory-to-sales ratios.
However, he added: “We also believe this adjustment period will be over rather quickly.”
The company saw no such slips ahead for its Swift Denim division, as the jeans category has continued to perform well over the past year despite ups and downs within the rest of the apparel business.
“Swift’s sales are extremely strong and we believe they will stay that way,” Wiener said. Corduroy fabric sales are also running ahead of plan, he added, saying that in that category, “if history follows, you have two or three good years followed by two or three poor years. I hope that we’re at the start of the two or three good years.”
Wiener also said that Galey’s full-package garment production venture was “cash positive” for the quarter. Galey has been a leader in the textile industry’s efforts to begin producing apparel, though it has had difficulty consistently running its garment operations profitably.
The ceo warned that the company was expecting the venture’s results to slip in the second quarter, as it phases in four new styles of pants. Changing model styles has proven to be one of the biggest challenges to the company in running its apparel operations efficiently, though Wiener said he believed that the company would digest the new styles in “a two- to three-month period at most.”
He also said that, as a result of new competition from Caribbean Basin garment makers, the company was lowering its selling prices on garment packages.
Another major influence on the company’s margins was rising energy costs, he said, particularly the price of natural gas.
By segment, the company’s most significant margin improvement came in the denim business, where operating income came to $7.8 million, excluding charges, up 90.9 percent from a year earlier. Denim sales were up 23.5 percent, to $78.6 million.
At the company’s Galey & Lord apparel division, which makes khaki twill, operating income was $8 million before charges, up 45.5 percent. Sales for that division rose 9 percent, to $107.6 million.
As reported, Galey & Lord is an initial licensee for Nano-tex wrinkle-free and stain-free fabrics, which use a technology developed by a venture owned by Burlington Industries. Tropical Sportswear International is said to be readying a product launch using Galey’s nanotechnology-enhanced products.
In New York Stock Exchange trading, Galey shares gained 25 cents to close at $2.89.

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