GALEY & LORD IN BLACK, KHAKI, DENIM CITED
Byline: Scott Malone
NEW YORK — Citing strong performances in its denim and khaki fabric operations, Galey & Lord Inc. reported net income of $2.5 million in the third quarter. That compares with a $5.9 million net loss in the prior-year’s quarter.
Results were substantially helped by a $1.85 million payout due to a settlement on some bad dye Galey had used during 1998 and 1999.
Sales for the three months ended July 1 were $262.2 million, up 5.1 percent from $249.5 million.
“Domestic demand for our khaki and denim products was strong and both categories exhibited year-over-year gains,” Arthur C. Wiener, chairman and chief executive officer, said in a statement. “Swift Europe denim also had significant year-to-year improvement as denim regained its fashion position overseas.”
Kay Norwood, analyst with Wachovia Securities Inc., said that the strong rebound in the denim business was a key element in the quarter.
“Denim is strong,” she said. “They’ve been running full since December or January, and the market is strong enough that they can choose what business they want, which means you get product-mix improvements on top of full capacity. If they had more capacity, they could run more fabric, but it’s more profitable to be able to turn down basic goods.”
The Swift Denim segment reported operating income of $5.6 million, compared with a $1.2 million operating loss a year ago. Sales were $99.2 million, up 7.9 percent from $91.9 million.
After experiencing weak demand throughout much of 1999, denim mills have seen a significant uptick in volume this year, partly due to the turnaround at Levi Strauss & Co. Levi’s dramatically reduced its denim buying last year in an effort to trim its inventories.
The improved denim demand has led a number of top mills to seek higher denim prices for the first time in about three years. However, those price hikes are taking effect during Galey’s fourth fiscal quarter, so that benefit has not yet been seen.
Norwood said on average the company had raised its selling prices 3 to 4 percent. But given that average prices in the third fiscal quarter are 5 percent lower than they were last year, the new hikes won’t offset the declines of recent years.
Still, Norwood took heart from the fact that the hikes were sticking, despite jeansmakers’ reluctance.
“Obviously, customers are going to complain about that kind of thing,” she quipped. “What are customers for?”
She said Cone Mills Corp. and Burlington Industries Inc. will likely also report strong denim results when their numbers come out next week, though both companies’ overall earnings likely will be dragged down by problems in other areas of their operations.
Galey’s apparel fabrics twill unit reported operating income of $11.8 million, boosted by a $1.9 million payment related to a defective chemical purchase. That operating income figure compares with earnings of $3.4 million a year ago. Sales were $124.1 million, up 8 percent from $114.8 million.