Galey Riding High on Denim
The good news in the textile industry is that demand for denim continues to be high.
That was the word from Arthur C. Wiener, chairman and chief executive officer of Galey & Lord Inc., at the company’s annual meeting in midtown Manhattan on Tuesday.
“The market for denim remains strong,” keeping the company’s Atlanta-based Swift Denim division running at full capacity, Wiener said. Further, on the other side of Atlantic, consumers are also snapping up jeans and “mills in Europe are enjoying substantial sold-ahead or backlog positions,” he said.
He also contended that the supply-and-demand imbalance that has kept margins low in recent years is starting to work itself out. Wiener said that his estimates put last year’s North American denim demand at 949 million square yards, only 65.9 million square yards under the continent’s total capacity. That’s a lower oversupply figure than the company had seen in recent years, he said.
“The trend of overcapacity continues to decline,” he said. “This is good news for the textile mills.”
However, it’s not all good news.
“The negative in the market is that selling prices are constant,” he continued. “The industry is fighting for price increases, but it’s difficult.”
While Galey, along with the other top U.S. denim mills, was successful in imposing a slight increase in selling prices on denim last summer, executives have said it’s not been enough to offset their rising costs.
A major factor behind those increased expenses is the high cost of petroleum derivatives. While the denim business is somewhat isolated from the runup in synthetic-fiber prices, Wiener said its natural gas prices have recently risen four- to fivefold.
“Higher energy costs are affecting us all over the world to an unbelievable extent,” he said.
Wiener also said the company’s Swift Denim-Hidalgo Mexican joint venture is to begin shipping fabric to U.S. jeansmakers in Mexico by early March.
While demand for denim is strong, Wiener said, demand for the plain cotton twills used in khaki pants has been off in recent months as retailers work down their inventories in response to slowing consumer spending.
“There is no question that our volume is being affected by it,” he said.
Strong demand for corduroy, which Galey can weave on the same looms that it uses for khaki fabric, is only partly offsetting the decline, he added.
Also on the khaki front, Wiener said that its G&L Service Co. full-package garment operation, which makes casual pants, plans to increase its total output for the fiscal year ending in September to 7 million to 7.5 million units, up from 5.8 million in fiscal 2000.
However, he added that the garment operation, with plants in Mexico, has to cut its costs as a result of new competition from garment makers working in the Caribbean Basin, where duties on apparel of U.S. fabric were recently lowered. Wages are also typically lower in the Caribbean.
“That cost structure has to be improved,” he said.
Overall, the company is projecting a modest decline in revenues for 2001, offering an estimate of $949.5 million, compared with $957.8 million in 2000.
Designs Comps Slip in Quarter
Designs Inc., which operates 102 outlet stores selling Levi’s, Dockers and Slates, reported that its fourth-quarter comparable-store sales were off 8.9 percent for the fourth quarter ended Feb. 3.
Total sales for the 14-week 2001 quarter were $53 million, up less than 1 percent from $52.7 million in the 13-week 2000 quarter. The company said the lower sales were a necessary evil for margin improvement.
“Last year’s sales for the fourth quarter were positively impacted by aggressive promotional activity,” said David Levin, who joined the company as president and ceo in April. “This year, our emphasis was toward inventory management and maximizing gross margin dollars.”
He said that gross margins were 20 percent higher in dollars, as a result of the Needham, Mass.-based company’s less-promotional strategy.
For the 53-week year, net sales came to $194.6 million, up 1.3 percent from $192.2 million in the 52-week fiscal 2000. Comps were off 3.8 percent. Excluding the extra week in 2001, net sales would have been flat.
Mudd Revisits its Roots
Since its inception five years ago, Mudd Jeans has emerged as one of the junior market’s hottest brands.
While Mudd’s offerings, distribution and customer base may have expanded over the years, company partner and designer Jo Ann Jacobsen said the reality of keeping costs down in the competitive moderate market have diminished the brand’s edgy appeal.
So in an effort to recapture the cutting-edge status Jacobsen said the brand enjoyed in its youth, the company will launch in the fall M by Mudd Jeans Limited Edition, a fashion-driven line with price points slightly higher than the company’s other offerings.
“I’m trying to reestablish that little trendy microcosm of fashion that existed when we started,” she said. “As our distribution has broadened we’ve kind of lost our edge.”
Mudd’s popularity has alienated some of the hipsters that initially supported the brand, Jacobsen said.
“There is a customer that we had when we started out that was a trendsetter, but trendsetters tend to steer away from what everybody else is doing,” she said. “This is an attempt to recapture their attention.”
The M by Mudd line will include denim skirts, jackets and low-rise jeans with studs, lace-up detailing and chain belts. The line will also include a high-rise pair of jeans with a silver chain belt — an item Jacobsen expects contrarian hipsters to embrace because of the popularity of low-rise jeans.
“Trendsetters were the ones that started wearing low hip-huggers and they are kind of getting tired of that,” she said. “They are going to want to start experimenting with something different and I think that will be a high-rise. It’s logical — if it’s low, it’s got to go high.”
Jacobsen said the average price for a M by Mudd pair of jeans will be $38. Current Mudd Jeans items retail from about $30 to $34.
She said the line will feature more “upmarket fabrics” than the standard Mudd line.
“It’s going to be a bit better quality,” she said, “because I have a little bit more money to spend.”
Laser Beam Jeans
Fractal Jean Co., a newly formed Cleveland-based company, plans to enter the denim market this spring with a line of jeans featuring patterns etched by lasers.
The line will include one style of jeans — a low-rise flare — in five psychedelic patterns: Swirl, Matrix, Stardust, Galaxy and Teardrop.
Vice president of sales Debbie Monagan said laser-generated patterns are sharper in appearance than their silkscreen counterparts, a factor, she argued, that will attract quality-conscious consumers.
“I’ve seen some jeans that have been silkscreened with patterns,” she said. “They just don’t have the depth and the richness that these do.”
TechnoLines LLC, Fractal Jeans’ parent company, developed the laser etching technology used on the jeans.
“The laser etches and lasers away miniscule amounts of the fabric…it looks like a burning process when you see it,” Monagan explained. “The darker part of the pattern is the original denim and the light is what has been etched.”
The laser works in conjunction with a software program that generates an infinite number of patterns.
The jeans will be assembled in Mexico, but the laser etching will take place in Minneapolis at LasX, a firm contracted by Fractal.
Monagan said Fractal will roll out boot-cut jeans and denim skirts in the summer, as well as continue to add new patterns to the jeans.
The jeans, targeted at women aged 18 to 34, will wholesale between $60 and $65. Monagan said Fractal will target trendy specialty stores in urban areas.
“We want it to be in the urban hip markets — we want it in the Village, in SoHo, out in L.A.,” she said. “This product might have its roots in the Midwest but it’s hip enough that it can do well in those markets.”
Monagan said she expects consumers to be bowled over by the patterns, not necessarily by the technology behind them.
“They probably won’t care if it’s laser technology or not,” she said. “I think it’s the design that’s going to wow them.”