Goodbye WPS, Hello WPI
August 15, 2005,
New York — It's a new company, with a new name — and the name portends myriad new opportunities beyond the home textiles world.
In a wide-ranging interview with Home Textiles Today, senior executives from Icahn's businesses and WestPoint's top management discussed the outlook for the company and the early steps that are being taken.
At AREP, said Jon Weber, president, “We buy undervalued companies at the right point in the cycle, and apply capital patiently to grow (the business).” One of AREP's strengths is the application of capital and management to affect positive changes, Weber explained, emphasizing that AREP's commitment is for the long-term.
“I encourage anyone who thinks this is some breakup play or some real estate play to get the idea out of their head,” he said.
Assessing the new WestPoint's position in the market, he said, “It is inherently a positive one. WestPoint now is the best capitalized business in the industry, and we're breathing oxygen into the business. This management team will get some bounce from this.”
And helping them, Weber emphasized, is the company's new financial strength: “$225 million cash, unencumbered working capital of at least a couple hundred million and no net debt.”
Weber and Jeff Engel, chief procurement officer for Icahn Associates and a former senior procurement executive at Ford, emphasized that one of the critical, immediate issues facing the company is the need for accelerating offshore sourcing.
But at the same time, Engel noted the opportunities for the company to become a global supplier. “We have to be a global source” before that happens. And while sourcing poses the immediate challenge, other decisions concerning WestPoint will be made at a deliberate pace.
“We have taken a business with serious problems. There's no single silver bullet, but there are a lot of things” that can be done to make it work, Weber emphasized.
One of the big challenges facing WestPoint, Weber noted, “is that this has long been a manufacturing-centric business, built around mills and manufacturing in the United States. Change is always painful, so the challenge is to get the hearts and minds of the people to change.”
Looking at the progress in offshore sourcing to date, M.L. “Chip” Fontenot, president and CEO, observed that because of WestPoint's financial situation, “The company really hasn't been able to execute offshore.” But in a positive direction, he pointed to the opening of a Shanghai office last year “that offers us a base for sourcing as well as an office, and it will help accelerate the process. We now have the financial backing and the staying power.”
However, he added, “Doing things the same as others are doing it doesn't differentiate us.” And for WestPoint, he believes, there are three major options: “sourcing, joint ventures and ownership.”
And in an industry that he calls “undercapitalized,” there now is the opportunity to invest capital. Engel added, “We've not rejected anything at this point. Others are approaching us, and we're considering all options.”
Now that the financial health of the company is assured, Fontenot stresses, “We're back focused on product — 100 percent. With the right product we will win.”
But Fontenot emphasized, “We already do more than $300 million offshore today in greige goods, Ralph Lauren and finished product. The challenge is to transfer domestic production to sourcing in terms of the right quality and on-time deliveries.”
Art Birkins, president of the basic bedding division, said: “Our product-direction strategy is to concentrate on our brands like Charisma and Ralph Lauren in basic bedding, as well as value-added product. We'll be moving away from opening-price-point merchandise in general, but we'll work with key retailers on supply and logistical programs.”
And in terms of product, Bob Dale, president of the bed and bath business, outlined some of the highlights the company will present at the October market.
“First, we will have our trend room, and this market it will have a different approach, and technology will be another important feature — not just technology in home textiles, but we will show what is happening in other businesses. It's not as big a leap” as some would think, he contended.
There will be an emphasis on “our multiple licenses from Disney to Charisma,” as well as lifestyle merchandising execution. One product standout, Dale noted, is the use of “fragile” fabrics for top-of-the-bed.
And along with the product launches will be a focus on packaging and point of sale, increasingly important challenges for both suppliers and retailers.
Before market, the luxury brand Charisma will make its national debut at Bloomingdale's. “We intend to build this franchise. We're working carefully to augment horizontal opportunities. We want to overservice it on the launch and convince people it is a dedicated business,” Dale remarked.
Discussing its other luxury brand, Fontenot commented, “There is more focus, and bedding in particular is doing quite well. And the Lauren Studio addition of mix and match is flying.”
As for a potential impact of CAFTA on the business, Fontenot pointed out there is no weaving, dyeing or finishing of any scale in the region, especially in home furnishings. “But there may be an opportunity in cut-and-sew, but a whole different analysis must be made. It may keep some functions here in the United States,” he said.
Company executives see an opportunity in the move by many retailers to go direct with their sourcing.
“It's another major change in the industry,” Fontenot said, “but the logistics for everyone are more complicated. Understanding the new competition is more challenging. But logistics and systems are our forte, and we can fill an important role in this area.” Dale added, “We do know logistics, and we're connected to all the major retailers. We have the ability to be the right fixer.”
Looking at the industry in general, Fontenot said, “This may be one of the most exciting times in the soft home business.” Despite all the shifting, “There is more opportunity than ever.” As for when the dust will settle, Fontenot has a shorter timeframe than many. “In 18 months it will be clearer and clearer,” he said.