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Pillowtex cuts losses with more closings

Marvin Lazaro, Staff Staff -- Home Textiles Today, May 21, 2001

KANNAPOLIS, NC — Laboring under a staggering debt load and facing a weak market outlook, bankrupt Pillowtex Corporation continues to shear away money-losing portions of its operation.

Last week it announced that it would close two more of its facilities and restructure another as the $1.3 billion company slowly downsizes the scope of its business.

Plant No. 4, a sheet manufacturing plant located within the sprawling NC complex, and a towel yarn operation in Columbus, GA, will both be shuttered by July 15. In addition, Plant No. 1, a towel plant here, will restructure its weaving department and portions of its wet finishing, fabrication and distribution will be restructured.

The three operations primarily serviced Pillowtex's mass merchant retail accounts.

Almost 800 employees, approximately 6.4 percent of Pillowtex's 12,200 work force, will lose their jobs as a result of the latest round of changes, 200 from Plant No. 4, 390 from No. 1 and 190 from Columbus.

The announcement of the shutdowns comes on the heels of the shutdowns of Pillowtex's blanket yarn plant in Newton, NC, and its cut-and-sew plant in Rocky Mount, NC. Both operations are scheduled to permanently close on June 30. Approximately 300 employees are being laid off as a result of those closings, raising the total amount of Pillowtex employees who will be on the unemployment line by mid-July to almost 9 percent.

Saddled with $1.4 billion in debt, Pillowtex faces the task of overhauling its business while simultaneously assuring creditors it is doing all it can to staunch the flow of red ink, according to Bob Haase, executive director of operations.

"We have to do the right and prudent things in regards to the company," Haase told Home Textiles Today. "These moves are consistent with what our creditors are looking for, but they're also aimed at preserving as many jobs as we can. We had to look at what was the best way to arrange operations in order to get the best efficiencies that we could."

Haase said the elimination of the excess manufacturing capacity will also allow Pillowtex to align its production capacity with sales.

Pillowtex and its home textiles competitors, both large and small, have all been affected by the slowdown in retail sales. One significant casualty was Thomaston Mills, which put itself up for sale in late April. In addition, CMI recently announced it was exiting the greige goods business, and Spartan International shut its operations after 111 years.

Pillowtex's fourth quarter statement paints a bleak picture of the mill's recent fortunes. Losses widened to $233.2 million from $18.6 million in the previous-year period, sales plunged by nearly 25 percent to $305 million, and the company reported a negative gross margin of 35.3 percent.

For the year, the major mill's losses totaled $262.4 million, as sales dropped off by 13.0 percent. It was a year in which the company that holds some of the premier brands in the Charisma business —Canon and Royal Velvet among them — lost $53 million in Kmart business and the license to produce Ralph Lauren Home.

Only four years ago, Pillowtex was the country's largest home textiles company with sales of $1.6 billion, thanks to a series of acquisitions including Fieldcrest Cannon. Its position has steadily eroded since then, and last year sales declined in every product segment the company produced. The bed and bath division alone saw a 13.9% sales decrease from 1999 to 2000, from slightly more than $1 billion to $942 million. Blankets dropped 24.2 percent to $90.6 million, and the pillow and pad business declined 5.7 percent to $286.7 million.

Plant No. 4 manufactured low-thread-count muslin and percale sheeting fabric. Goods manufactured there will be produced at Pillowtex's last remaining greige facility, Plant No. 16 in China Grove, NC, and the building will be sold. Haase said a final decision on what would happen to the equipment within the plant, which was among the oldest and least efficient Pillowtex had running, had not yet been made.

The Columbus yarn department produced yarn for towel weaving. Operations will be shifted to the towel yarn manufacturing department in Kannapolis and to the yarn manufacturing plant in Tarboro, NC. The towel warping, bleaching and dyeing departments will continue to operate in Columbus as will towel manufacturing operations in Phoenix City, AL. Haase noted that the move in operations to the Tarboro and Kannapolis plants will bring those operations to at or near full capacity.

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