NEW YORK — Industry reaction has been positive to chemical giant DuPont’s plan to spin off all of its fiber businesses, as well as its stable of Lycra branded apparel operations, into one $6.5 billion unit called DuPont Textiles & Interiors.

Observers said they believe the bold move could ultimately be a boon for a beleaguered textile industry and for DuPont’s international presence. It could also bolster intimate apparel sales on a global scale through a faster, cost-efficient network of production at DuPont plants, comanufacturing and contracting in Asia, as well as speedier distribution down the supply chain to mills, manufacturers and retailers.

Since announcing its dramatic strategy Feb. 11, DuPont has begun receiving accolades from the financial community, including an upgrade from “market perform” to “strong buy” from Deutsche Banc Alex. Brown, with a 12-month target price of $57 a share.

DuPont shares rose $1.84 to $44.56 when news of the divestiture of the newly christened DuPont Textiles & Interiors sent shock waves through the intimate apparel, textile and retail industries. DuPont closed at $47.30, up 64 cents, on the New York Stock Exchange Friday. The restructuring is expected to be completed by yearend 2003. DuPont’s market capitalization is $45.68 billion.

Industry observers also believe the reorganization could finally make chairman and chief executive officer Charles O. Holliday Jr.’s oft-stated goal of 10 percent annual growth in earnings per share an attainable feat.

Although market receptivity tends to be time sensitive to initial public offerings, the prospect of an IPO for the new fibers-related operation was met with optimism. Formerly operating as DuPont Apparel & Textile Sciences, a more efficient organization is being structured that will most likely include low-cost production and employee layoffs. A timetable to come up with a plan to cut operating costs is expected in the next six weeks or so.

Led by Richard Goodmanson, DuPont’s executive vice president and chief operating officer, DTI’s management team includes Steven R. McCracken, the group vice president who served as president of Dupont’s ATS. McCracken is a top executive who has a track record of turning around lackluster businesses. In the mid-Nineties, McCracken tripled sales of the Corian countertop business by giving a basic home product a lifestyle image, and in 2000, DuPont turned to McCracken to devise a strategy to beef up its signature Lycra business, which had begun suffering amid intense competition.

In addition to key brands Teflon and Stainmaster, McCracken said the new division will continue to refine its sophisticated and worldly marketing approach, which encompasses an ambitious advertising campaign for DuPont’s new generation of microfibers, including Soft Comfort Lycra, Tactel Soft Black, Tactel Metallics, as well as a push to pump up the hosiery business with a bicomponent fiber called Tactel Duo, all aimed at different global markets.

The general market conditions for an IPO, especially in the textiles arena — a sector a majority of executives described as a sunset industry — are not ideal considering the sour economy and troubles at major mills. But industry observers generally agree that, in a year or so, financials should be on target for an IPO following what is expected to be a continuing shakeout of smaller, weaker players in the market.

However, executives believe it is still too early to tell if the spinoff will be a smart management move, primarily because management focus tends to lead to better results, but only if attention is directed toward the most important strategic and operating issues. Additionally, correct resource allocation decisions will be crucial if the new DTI venture is destined to become a powerhouse in the global marketplace, where the key trend is to have fabric sourcing in the same regions as garment sourcing.

Charles Nesbit, president and ceo of the Sara Lee Intimate Apparel unit of Sara Lee Corp., said: “Clearly, DuPont like all textile players, is responding to the rapid changes brought about by globalization and the consolidation of resources at every step of the supply chain. I’m optimistic about their prospects. As long as they continue to bring innovation to the marketplace at a reasonable value to their customer base, they should be successful despite the challenges of today’s marketplace.

“Sara Lee Intimates has a good relationship with DuPont, primarily because of the good people we work with in the organization and their commitment to servicing our business. At this point, I see the changes as positive and I look forward to working closely with the management team on a number of initiatives.”

Michael Fitzgerald, president and ceo of Delta USA, the American unit of Israel-based Delta Galil, said: “I think the spinoff was strategically sound from a financial point of view. Potentially, it will result in a more agile and aggressive supplier to the industry, which is good. However, I am concerned that the pure research that has been DuPont’s hallmark will diminish, resulting in less innovation in textiles and apparel.

“DuPont product innovation resulting from extensive research in fibers has been the fertilizer that has given life to our [intimates] business over the last 40 years.”

As reported, the corporation will restructure itself into five new units: electronic and communication technologies; performance materials; coatings and color technologies; safety and protection, and agriculture and nutrition.

Regarding management at the DTI segment, Fitzgerald said: “McCracken is a charismatic leader who understands our intimate apparel business. Free from the constellation of goals the DuPont company pursues, at the same time he will be able to focus on fibers and extend leadership to the industry.”

Looking at the overall picture, Fitzgerald noted: “The opportunities for DuPont are in developing a global strategy to serve a global market. DuPont supported a strong textile business in the U.S. with its products. When the textile industry failed to follow the apparel business offshore, the U.S. supply chain was broken. DuPont has the opportunity to be at the head of a new global supply chain that not only serves factories, but also consumers around the globe.”

Tom Ward, president and ceo of Maidenform Worldwide, said: “I think it’s positive and the the move will be good for DuPont and good for Maidenform. We have an excellent relationship with them, especially with our Flexees brand. Lycra is a great product and we are very supportive of it. As a separate entity, they will be able to bring more innovation to the marketplace. We know the management team and expect to work more closely with them.”

Bob Nolan, president of the Jockey and designer brands at Jockey International, said: “We are pretty good users of Lycra. I believe this move will really allow them to focus on the textile business and I assume it will be better for everybody in our industry. DuPont has been a very successful company throughout the years. They know what they are doing.”

Virgil Simons, general manager of Dogi International Fabrics USA, said: “The reality is DuPont has been under attack from other suppliers of nylon, polyester and spandex-type products on a global basis. That competition is not going away, it’s going to increase. DuPont has to become more global.”

Simons added: “I feel very confident in the DuPont corporation. They have very good professionals who I’m sure will strengthen the entire fibers and fabrics areas. They are very market-aware people, very plugged into what’s happening vertically from retailers to mills and manufacturers. And that’s a real plus in product innovation and product implementation.”

“I think it’s a very good move for DuPont,” said Sidney Stern, vice president of marketing at Native Textiles. “Now, they will be able to focus exclusively on their own business, away from the corporate umbrella.”

From a retailer’s point of view, Bob Pawlak, vice president and divisional merchandise manager of intimate apparel and coats at Milwaukee-based Carson Pirie Scott, said: “One of the biggest problems in the [intimates] industry is the supply channel to manufacturers. If anything could be done — if DuPont could improve the supply line to manufacturers — it would definitely have a very positive impact on retailers.”

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