CONE MILLS TO DISCONTINUE KHAKI FABRIC
Byline: Scott Malone
NEW YORK — In a move it said marks the end of almost three years of restructuring, Cone Mills Corp. on Tuesday said it would close its khaki-fabrics business.
That leaves denim as the bulk of its operations, along with finishing services and jacquard home-furnishings fabrics.
“For the last 2 1/2, three years, I’ve been looking at what businesses we need to be in, who needs to be running them and how do we take losing operations and turn them around?” John Bakane, president and chief executive officer of the Greensboro, N.C.-based mill since November 1998, said in an interview.
“It’s a different world going forward for us. We’re shifting gears from, ‘What do we want to be when we grow up?’ to, ‘How do we take the businesses we are comfortable with and make the best out of them?”‘
The company also said the extreme uncertainty in the apparel market since the Sept. 11 attacks will likely leave it with a shaky outlook until mid-2002. For the quarter ended Sept. 30, the company recorded a net loss of $4.6 million, or 22 cents a diluted share, down from earnings of $1.4 million, or 2 cents a share, on a 28.8 percent drop in sales.
In a conference call with financial analysts, Bakane said: “The shutdown of the khaki business made more sense, given changes in economic conditions.”
He said the shift in production of khaki pants to overseas factories had hurt demand for Western Hemisphere producers of the fabric, which is also made by Galey & Lord and Avondale Mills. Cone’s khaki business was the smallest of its four sectors in the recently ended quarter, recording sales of $6.1 million — down 49.5 percent — and an operating loss of $462,000.
Cone’s khaki business consisted of buying gray twill fabric and finishing it at its Carlisle, S.C., plant, which will continue to operate. Bakane said only a handful of jobs would be lost.
Since Bakane took the ceo reins in 1998, the company has trimmed its employee ranks from about 6,300 to about 3,300. Bakane said Cone had seen a downturn in demand since the Sept. 11 attacks, as retailers have scrambled to reduce inventories in the face of slowing shopping. Total third-quarter sales came to $113 million, down from $158.7 million.
He noted that Cone has been hurt by retailers’ moves to cut inventory across the board, even in the denim area, which has been seeing strong consumer demand.
Cone’s denim sales for the quarter were off 31.2 percent, to $82.7 million. The denim unit recorded operating profits of $2.5 million, down from $10.3 million in earnings for the comparable quarter last year.
“This correction will last until early 2002,” he said. “Then we expect to begin a recovery process.”