Jennifer Negley -- Home Textiles Today, November 13, 2000
A month or so ago, a retail ceo had just finished doing an interview.
He began to talk discursively about the outlook for the economy, the woes besetting many home textiles manufacturers and the challenges facing retailers in various channels.
He talked about how badly retail stocks had been clobbered over the past year-his company's share price had tumbled nearly 300 percent since the summer-and about Wall Street's disinterest in retail stocks. He lamented that the market is in such a tizzy that it pounds on a solid performer such as Home Depot for announcing that its jump in the year's EPS would be 16 percent as opposed to 25 percent.
Then he was asked to predict when the current state of affairs might right itself.
His response: Never.
The nature of American business has been utterly transformed, he argued. The financial field is populated with up-and-coming young execs who have never experienced a recession in their professional lives. Technology has changed how we evaluate and react to information that impacts business forecasts. It is our way of thinking about business that has yet to catch up.
That's a point of view worth considering when one tries to explain why the home textiles industry finds itself in its worst state in 20 years at the same time that the country's economy has been humming along so prettily.
Historically, the textiles industry has served as an economic bellwether, leading the nation into recession or advancing out of recession ahead of other sectors.
That doesn't seem to be the case any longer. There are few, if any, who would point to the textiles industry's malaise as the red flag for the U.S. economy. But what may be happening instead is that the industry, still in bellwether mode, stands at the vanguard of a different kind of economy.
It is feasible that the business economy has become so fragmented that individual industries have developed a life independent of one another. It's possible that in the future it will be rare for the economy as a whole to rise and fall. Instead, the individual industries may pursue their own course independent of the overall economic climate.
And if that's the case, it is possible that the textiles industry is the first to experience a full-blown sector recession.
It's easy enough to point to the elements that have brought the industry to its current state:
Competition from imports;
Cotton and oil prices climbing;
The competitive disadvantage of being tied to an equipment-heavy manufacturing process;
Retail demands for fast response, which leaves manufacturers precious little time to adjust for changing economic conditions;
The continual erosion of retail prices for basic goods, even in the face of quality improvements.
The consolidated retail market, which has created large and demanding retail customers that have an ever tighter chokehold on manufacturers.
It's a trickier matter to foresee how the whole business may shake out. U.S. manufacturers could become branding and marketing arms for overseas textiles producers. The homogenization of product carried by the retail giants may create an opportunity for small regional retail concepts to crop up.
In either event, it's likely that the industry will need to create a new formula to determine how a business is judged. That would be an industry evolution everyone could cheer about.
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