Westpoint to Cut Expenses in 2008
March 24, 2008-- Home Textiles Today,
New York —WestPoint International will continue to cut operating and capital expenses in 2008 as it wrestles with operating losses and a falling top line.
Those revenue declines will likely continue into 2009, company officials said last week during a quarterly conference call.
Icahn Enterprises, WPI's parent that contains WestPoint Home, also reported negative cash flow for the division in the company's 10K annual report filed with the Securities and Exchange Commission.
For the full year, WestPoint posted a 23% decline in sales, to $683.7 million, from $890.8 in FY06. Operating losses for the full year deepened, however, to $158.5 million, compared to $143.4 million last year, a 10.5% change.
IEP said its home segment had negative cash flow from continuing operations of $62.1 million, compared to $29.9 million in fiscal 2006.
Revenues at WPI dropped 30%, but operating losses moderated slightly in the fourth quarter as the company continued to shed unprofitable business and it felt the impact of a slowing economy, home and retail sector.
WPI, the parent of WestPoint Home, recorded an operating loss of $33.5 million, a 12.3% improvement over the $38.2 million operating loss posted during the same quarter in 2006. Revenue dropped to $152.6 million, from $218.5 million in last year's fourth quarter.
“From last year, we still see the effect of programs we so-called 'walked away' from, or chose not to participate in those bids later on in the year,” said Peter Shea, president of Icahn Enterprises. “So we'll see the effect of that into '08.”
The company noted that WPI maintains a high degree of liquidity with $136 million of unrestricted cash available.
IEP executives said both industry pressures and economic forces will largely continue to control the division's fortunes.
“The most important thing about what's going on at WestPoint is our cost reduction initiatives,” offered Peter Shea, president of Icahn Enterprises. “If you look back over the last two years that has been the primary reason why we have not been able to maintain the top line. We've been reluctant to pursue programs that have been losing money.”
While that's begun to moderate with the investment in off-shore production capacity and the continued downsizing of U.S. operations, a weak retail and home décor sector will tamp down results, he said.
“I think we will see a weak economy, weak pull through at retail, so I would expect that we'll probably see some softness off the top line again in '09.” Shea said.
During a question-and-answer session with analysts, executives said they were monitoring developments with retailer Linens 'n Things, which also reported results last week.
“That's a situation we're watching, and we don't think we have any material exposure there,” Shea said.
WestPoint will continue to cut capital spending into 2008, trimming it to between $12 million and $15 million, from $29.7 million last year.
During last year, WestPoint shed its retail stores, and Icahn Enterprises sold its casinos and purchased PSC Metals, further diversifying its holdings.
WPI is the second largest operating division of IEP, after the recently acquired metals business, which produced $834.1 million in revenue last year. IEP's other interests include real estate and investment management.
IEP currently has $7.5 billion in investments under management and the investment segment recorded $588.3 million in revenue. The company said it will seek additional opportunities in the distressed company sector in 2008.
For the year, IEP reported net earnings of $308 million on total revenues of $2.49 billion. WestPoint reported that last year, 43% of its business was in private label, 24% was under licensing arrangements and 33% was under its own brands, including Martex.
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