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Top 15 Gains Slowly

Don Hogsett, Staff Staff -- Home Textiles Today, January 10, 2005

New York — Helped once again by solid gains at the nation's mid-tier home fashions suppliers — while the industry's biggest players were stuck in neutral — composite sales of the nation's 15 largest home fashions suppliers edged up a skimpy 1.8 percent last year, to $7.6 billion from $7.5 billion the year before.

And that wasn't even as good as the 2.8 percent increase put up the year before, during 2003.

The numbers would have been higher — perhaps even much higher — but for the hammering vendors are taking at the hands of their customers. A case in point: Springs Industries Inc., by far the nation's largest supplier, where sales inched up just 1 percent, to $2.4 billion. Said a rueful Tom O'Connor, “Flat isn't bad when you have to live with the staggering price deflation out there. Price is killing everybody in this business.”

O'Connor added, “It's been a really tough year. This is a real tough business. Business just isn't good, and the pricing pressure is unbelievable.”

And O'Connor wasn't the only one feeling the pain. Virtually every supplier contacted during this year's canvass pointed to unrelenting pressure from customers — to the point where many are walking away from programs that will cost them money, opting for profits over volume. Loren Sweet, CEO of Brentwood Originals, said he's deliberately backing away from a ferociously difficult throw business. “Throws we shrunk by design,” said Sweet. “A significant problem is price deflation. We could have maintained the volume, but we'd have had to buy the business, and that means losing money. I'd rather have the money than the sales.”

Prices alone aren't to blame — import pressures play their part — but whatever the cause of the downward pressure, composite sales of the Top 15 players are now down 9.2 percent from their high-water mark of $8.4 billion reached in 2000 — a sales shortfall in excess of $776 million. And that's factoring out the lost sales and the incalculable damage done to the industry by the demise of Pillowtex.

But making the hopeful point that there is a bright future for the fleet and the nimble is a company like Sleep Innovations, a producer of comfort sleep products, which joins the ranking this year after growing its sales in 2003 by a phenomenal 76 percent increase to $229 million. Founded in 1997, the company has gone from zero to more than $200 million in less than seven years, and plans to break $300 million this year, said CEO Michael Fuchs. “We almost doubled our sales last year, and we did that the year before, too. It may not last forever, but right now we're a hot company in a hot category.”


  
HTT's Top 15 Supplier Giants (sales in $millions)


 2004 Rank

 2003 Rank

 Company

 Est. '04 Sales ($Mil)

 2003 Sales

% Change 

 1

 1

 Springs Industries

 $2,425

 $2,400

 1.0
Significant Events: Like other home fashions players, Springs struggled to stay in place last year, hit hard by intense price deflation, notably at the mass merchant level. Its greatest source of strength was its towel business, which continued to benefit from the collapse of rival Pillowtex, growing by more than 6 percent, to about $330 million. But elsewhere business was tough, and the company posted declines in most other key categories. Facing increased competition from imports, and getting ready for more, Springs shut two South Carolina bedding plants, and shuttered a bath rug facility. In a radical shift in market philosophy, the company streamlined its New York City showroom into a trend floor and nine private offices for key accounts.

 2

 2

WestPoint Stevens 

 1,655

 1,656

 - 0.1
Significant Events: Working slowly through bankruptcy and an overhaul of its operations, the mill is still trying to craft a business plan and plan of reorganization that will satisfy its creditor constituencies and one of its new owners — investor Carl Icahn, who accumulated a position in the company’s debt last year. After skidding by almost 7 percent the prior year, sales stabilized in 2004, ending the year virtually flat. But margins narrowed, thinning the company’s cash flow and keeping it in red ink. Driven by the launch of the Martex brand at Sears, sheet business climbed 4 percent, to $520 million, and strong demand for towels during the first half helped generate a 1 percent increase there, to $565 million. But business skidded at a double-digit pace in blankets.

 3

 3

 Mohawk Home

660

 655

 0.8
Significant Events: In an increasingly difficult, price-sensitive environment for throws and decorative pillows, Mohawk Home made a strategic decision to opt for profits over volume, and planned its business down in both of those categories, walking away from some placements. But picking up the slack was a growing core rug business and a notably strong matelasse business, and the two compensated for declines elsewhere, and helped generate the modest gain in overall sales.

 4

 5

 Pacific Coast Feather

 332

349

 - 4.9
Significant Events: Like so many other suppliers in a rapidly shifting environment, Pacific Coast looked hard at some of its business segments, and put the focus on the bottom rather than the top line. “We exited a non-core business from a past acquisition that did not have sustainable profitability,” said Eric Moen, president and chief operating officer. This, he said, accounted for roughly half of last year’s sales decline of almost 5 percent. “We are in a rapidly changing industry, and we have every intention of taking advantage of these changes. However, to best do that we consciously chose to adjust our product portfolio, which impacted 2004 sales.” And walking away from some areas paid off, he added. “While revenue was off slightly, our overall financials improved significantly.”

 5

 4

Dan River 

 310

 374

 - 17.1
Significant Events: Like so many other suppliers in a rapidly shifting environment, Pacific Coast looked hard at some of its business segments, and put the focus on the bottom rather than the top line. “We exited a non-core business from a past acquisition that did not have sustainable profitability,” said Eric Moen, president and chief operating officer. This, he said, accounted for roughly half of last year’s sales decline of almost 5 percent. “We are in a rapidly changing industry, and we have every intention of taking advantage of these changes. However, to best do that we consciously chose to adjust our product portfolio, which impacted 2004 sales.” And walking away from some areas paid off, he added. “While revenue was off slightly, our overall financials improved significantly.”

 6

 6

Croscill 

 272

293 

 - 7.2
Significant Events: Losing ground for a third straight year, Croscill, once one of the industry’s highest fliers, has watched its sales subside by almost 10 percent over the past three years, from a high-water mark of $315 million in 2001. “The most positive thing is the window business, which is coming on strong,” said David Kahn, CEO. As growth slows, and competition from low-cost imports intensifies, Croscill is stepping up its own sourcing capabilities, shifting considerable production from its long-time base in North Carolina to Asian manufacturing facilities.

 7

 7

 Franco Mfg.

 256

237 

 8.0
Significant Events: One of the industry’s archetypal stealth companies, Franco has been flying under the radar, and flying fast, for the past several years, climbing steadily up the ranking to a spot as the nation’s seventh-largest home fashions supplier. Remarkably, it’s poised to leap frog into sixth place next year if it keeps on growing sales at its current pace. Franco continues to maintain is strong, historical base in kitchen textiles, but has successfully diversified into bed and bath categories, becoming a growing force in sheets, threatening larger and longer-established companies. Indeed, Franco broke into the ranks of the nation’s five-largest sheet suppliers in 2003 with sales of $95 million, and bulked that up 8 percent in 2004, to roughly $103 million.

 8

 8

Maples Rugs 

 249

230 

 8.3
Significant Events: Still growing in a difficult environment, but not at the same blazing pace as last year, when sales soared 15 percent, Maples pushed sales up at a more moderate pace of 8.3 percent. "It's not the kind of growth we've had, but with business the way it is, we'll take it," said Wade Maples, CEO. Fueling the growth, said Maples, were new placements generated by a wide range of new products, spearheaded by the Royal Velvet license. "We've already started shipping that, and we're very pleased. We've expanded accent rugs with all accounts, the prints and space-dyed products and ribs." Gearing up for even greater growth, Maples added 10,000 square feet to its plant, installing new tufting machines and adding to its yarn processing.

 9

 9

Hollander Home Fashions 

 234

 228

2.6
Significant Events: Driving the growth this year was a gain of almost 5 percent in pillows, which offset a drop of 12 percent in down comforters and flat sales of mattress pads, said Jeff Hollander, president. Of particular note, said Hollander, was “the strength of Laura Ashley at all levels of retail, and the strength of our down-alternatives. The down alternatives are having a really good reaction at retail.” On the downside, he noted, “It’s tougher to get new business this year, given the level of retail consolidation. So I’m happy that we still have growth, given the demise of the regional department stores and the demise of the regional specialty stores.” But even with those challenges, he said, “I’m anticipating realistic sales growth of 10 to 15 percent in 2005, much of it in the same areas where we saw growth in 2004.”

 10

 n/a

 Sleep Innovations

 229

 130

 76.2
Significant Events: Sneaking up on an entire industry, and making its first appearance in the HTT Top 15 ranking by jumping squarely into 10th position is Sleep Innovations, the rocket-hot company in a phenomenally successful category — comfort sleep products. “We almost doubled our sales this year, and we did that the year before, too,” said Michael Fuchs, president. “It may not last forever, but right now we’re a hot company in a hot category.” Helping to drive those impressive numbers, Sleep Innovation’s products occupy a wide footprint throughout the marketplace, crossing all channels of distribution, with a notably strong presence at warehouse giant Costco, and strong distribution in big-box specialists. “Our pads and toppers and pillows are all accelerating at a very rapid pace. And you know why? Because they do what they’re supposed to do, they’re comfortable, and people are responding to that. We give people comfort, something tangible that makes them feel good. The other thing we do right is our packages. We make sure the consumer notices it. Making sure the consumer gets the message,” he said. Sleep Innovations hired a new pitch man last year, football legend Dan Marino. “And that’s going to take us up to a whole new level,” added Fuchs.

 11

 10

 CHF Corp.

 224

 214

 4.7
Significant Events: After years of explosive growth and a return to profitability, sales growth, while still solid, began to cool this year, said Frank Foley, CEO. “Our window business is solid, but this is the first year we haven’t tacked on substantial growth. But our bed-in-a-bag business is way up. We’re seeing substantial growth in bedding.” But on the downside, he noted, “Our bath is certainly off a little, 10 to 12 percent. And windows were up a fraction.” Helping CHF to make it numbers this year, said Foley, “We had a very good fourth quarter.” But polishing up his crystal ball and looking ahead, he noted, “I think 2005 is looking real dicey for everybody. It’s not looking real pretty.”

 12

 11

 Keeco

 201

 193

 4.1
Significant Events: One of the pioneer quilt suppliers, Keeco celebrated its 25th anniversary by continuing its recent strategy of diversifying its product line-up to include sheets, comforters, bed-in-a-bag, decorative pillows and table linens, a move that paid off with a boost in sales last year despite a $5 million, or 6 percent, drop-off in the quilt business that had once been its mainstay. The primary driver of growth last year was in sheets, with comforters and juvenile coming on strong. The company is now looking to diversify its customer base, hoping to add warehouse clubs and dollar stores.

 13

 13

 Louisville Bedding

 197

 182

 8.2
Significant Events: Bounding back from a modest drop in 2003, Louisville pushed sales higher at a double-digit pace, approaching the $200 million mark. "We had an increase pretty much across the board," said Steve Elias, the company's new president, who took the reins after Lewis Rudi resigned after less than a year on the job. "Pillowtex still helped." Additionally, said Elias, "The promotional end of the business was strong. And our licenses are working well, Beauty Rest, Simmons and Nautica. Nautica really came in strong during the second half." In its core pad business, Louisville racked up sales of $112 million, up more than 14 percent from last year. The foam pillow business exploded by 59 percent, shooting up to $35 million from $22 million in 2003. But acting as an offset, the sleep pillow business lost ground, skidding 19 percent, to $44 million.

 14

 15

Brentwood Originals

 190

 162

 17.3
Significant Events: After losing ground in 2003 as its throw business took a hit, Brentwood recovered las year with a gain of more than 17 percent. "The Moshi pellet-filled pillow was a great deal for us last year," said Loren Sweet, CEO. "That was a big part of our growth. That tactile experience is clearly big with the customers. It's still going strong. I think it has legs." Getting a boost from Moshi, pillows jumped 30 percent, to $157 million from $121 million last year. But lagging behind were throws and windows, throws sliding 30 percent, to $14 million from $20 million last year, and windows down 9 percent, to $19 million. "Throws we shrunk by design," said Sweet. "This has always been a very cyclical business, and we have moved on. We will be in throws, but they will continue to be a smaller percent of the total."
15 12 American Pacific 187 185 1.1

Significant Events: After joining the Top 15 ranking last year as No. 12 with a 19 percent jump in sales to $185 million, American Pacific slips down to No. 14 this year with sales virtually flat after being leap-frogged in size by newcomer Sleep Innovations and Louisville Bedding. Once a quilt company, American Pacific has successfully diversified into licensed bedding ensembles. Quilts and comforters both made gains in 2004, but the duvet business performed poorly. Bath and window, while still a small part of the business, performed well. Hobbling overall sales was persistent price deflation, which left American Pacific unable to make up in volume what it lost in pricing power.

Source:Home Textiles Today market research and company reports

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