Green has WestPoint in the black

Don Hogsett, April 29, 2002

New York — Grinning broadly, looking relaxed and poised, Holcombe Green Jr. seemed back at the top of his game last week for the first time in the past two years. He bragged to a roomful of analysts and investors that WestPoint Stevens is making money, back on track and has backed away from the brink.

After reporting an unexpected profit earlier in the day — and the company's stock zoomed up by more than 40 percent — Green, chairman and ceo, was back in familiar form and engaging in some good-natured chest thumping with a Wall Street audience that had all but written off Green and the company.

"We've really transformed the company in a lot of fundamental ways," Green told investors. "The industry is solid; this is a good business to be in. The home business is strong, houses are bigger, there are more and bigger bedrooms and bathrooms, and we're going to fill them up with our product."

Investors were clearly buying into Green's message, and WestPoint stock kept soaring in the days following and has now more than doubled in the past few weeks, to $5.05 last Thursday from less than $2.00 earlier during the month.

Brimming with optimism, Green drummed out his message staccato-fashion, one point rolling out right after another. "We have the highest operating margins in the home fashions industry, and we are the low-cost producer. We are No. 1 in sheets, No. 1 in towels, No. 1 in blankets and No. 2 in comforters, pillows and mattress pads. We are enjoying double-digit sales growth with all the growth retailers, Wal-Mart, Kohl's and the specialty stores. We are the No. 1 supplier to the growing mass merchant channel."Without skipping a beat, and relishing every minute, Green continued. "We are throwing off cash and paying down our debt. We have a solid new management team. We have expanded our brands, adding Disney and Ralph Lauren basic bedding. We are exploring new licenses. We have rationalized our plants, cutting costs and saving money. We have closed four plants, reduced our greige towel capacity by 5 percent and our greige sheeting capacity by 17 percent. We have eliminated 1,700 manufacturing jobs and eliminated 59 corporate positions, generating cash savings of $35 million related to labor and overhead."

And he wasn't stopping there, either. "The turn-around really started last year in the third quarter, when sales picked up by 4 percent. Our business continues to improve and the margins are starting to move back to where they ought to be. We have increased our global sourcing of products, and our sourcing now is in the range of two-and-a-half times what we were doing a year ago."

Even with all of the vexing issues of the past two years, WestPoint has managed to turn in the highest operating margins in the home fashions industry, Green pointed out, hitting 8.9 percent during the first quarter, up substantially from a level of 6.1 percent a year ago. "Our objective is to get that up into the 15 percent range, and we thank that's do-able. The turnaround is visible and for real."

Where Green left off, the ball was picked up by Chip Fontenot, president and coo, who told analysts: "We have all the tools in place to grow. We're going into our first full year of an expanded Ralph Lauren line, and Disney is gaining momentum, moving into Penney, Sears and Wal-Mart. Bed in a bag is a rapidly growing business for us. That's a real growth vehicle for us. The consumer has voted — that's the way she wants to buy the product."

Fontenot told analysts and investors, "We are the largest supplier of home fashions to Target, Kmart, JCPenney, Sears and Mervyn's. We are the No. 1 supplier to department stores with our Ralph Lauren brand. We are increasing our penetration with the specialty stores, Kohl's, Bed, Bath & Beyond and Linens'N Things. Kohl's we're really proud of. We set that as a target and a couple of weeks ago the Martex brand went in there and it's doing very, very well."

With sales picking up steam, WestPoint is also slashing its costs and reducing its overhead, Fontenot pointed out.

While WestPoint is sourcing more as it shut down some production, there's only so much to be gained by looking offshore, Fontenot pointed out. "The reality is that WestPoint Stevens can manufacture most basic sheet and towel products more cost-effectively than it can source them. We really are a state-of-the-art low-cost producer, and that's an advantage we plan to exploit."

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