Textile giants to spend less amid shifting landscape

Don Hogsett, May 7, 2001

NEW YORK — Busy coping with the wrenching demands of a radically shifting textiles landscape — stepping up global sourcing, and at the same time shutting down excess U.S. capacity, most notably in sheets and towels — domestic textiles producers are sharply scaling back their capital spending outlays to adjust to a new reality.

Spending for 10 key home fashions producers — ranging from the largest major mills to smaller, more specialized niche players — is off by 9.3 percent in 2001, to $295.8 million from $326.3 million last year. And it would have fallen even further, by almost 20 percent, but for a big jump in spending at textiles titan Springs Industries, the nation's dominant supplier, which is stepping up its spending more to cut costs than add capacity. Indeed, Springs continues to lead the industry in off-shore sourcing, now importing roughly $450 million worth of product each year, much of it greige goods for its big sheeting business.

Only five or six years ago, before global sourcing became the catalyst for radical transformation, the accepted rule of thumb required that an American textiles producer spend a minimum of 5 percent of annual sales just to stay competitive, to keep its costs low enough to supply the nation's margin-choking mass merchants. Looked at another way, it had to spend at least as fast as the rate of depreciation — the speed at which its equipment is wearing out, at least for tax purposes — just to run in place, much less pull ahead.

In this first year of a new millennium — a new era in more ways than one — only 20 percent, two of the 10 producers surveyed, meet the first old test, spending 5 percent of sales: Springs Industries and blanket producer Charles D. Owen. Last year, in sharp contrast, six of the 10 companies cleared that hurdle.

And the test of depreciation, replacing the equipment faster than it can rust? Only two of the five public companies in the list, Springs and WestPoint Stevens, make the cut, Springs at 114.3 percent, and WestPoint Stevens at 105.2 percent.

Reflecting just how much things have changed in so brief a period, spending at Crown Crafts, once one of the fastest growing home fashions producers, has fallen to just $1.25 million this year, about 10 percent of depreciation, and less than one percent of sales. But as Michael Bernstein, ceo, explained, as Crown Crafts shifts its operations — from making everything that it sells to marketing what it brings in — it needs to spend less money. "We have very little left in the way of manufacturing, so there's not much spending that's required," he said.

Elsewhere, some companies are spending less only because they've spent so much over the past few years to modernize or add to their plants, and are now bringing spending back to historical levels. A case in point is Pacific Coast Feather, where this year's spending is being scaled back to $3 million after $12 million. "Over the last two years, we spent more than $25 million as we doubled capacity," said Eric Moen, new coo. Ditto Hollander Home Fashions, where spending is whittled down to $1.5 million this year from $8 million last year, when the company automated some production and added a new Dallas plant.

For additional statistics and insight from home textiles industry leaders on this topic, please see the May 7 issue of Home Textiles Today.

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