Sheets Makers Optimistic Amid Price, Delivery Issues

Jill Rowen, Meredith Schwartz, May 24, 2010

Retail sales of sheets and pillowcases decreased by 4.7% in volume for 2009, the third piece of the bedding puzzle in HTT's Facts reports to show a decline. Like utility bedding and top of bed, the sheets and pillowcases category is mired in issues like inventory tightening, fewer retail doors, still rising costs of raw materials and supply and delivery problems. The category came in at $1.725 billion in 2009 versus $1.810 billion in 2008.

Some vendors and retailers are finding themselves caught in an unpleasant cycle. Retailers pulled back their inventory significantly last year. Once they were ready to buy, supply and delivery demands were strained to the limit. In addition, prices of cotton hit this category particularly hard with many vendors saying that pricing is now here to stay.

“We're all dealing with the same dilemma,” noted Lee Goodrich, a textile industry veteran and co-founder of Thomas Lee, Ltd., an online source for better bedding. “I'm talking to suppliers that can give me a good price, but I'm not confident about the quality. And I'm talking to another supplier who I know can deliver on quality but is pricey.”

“When it comes to supplies, 2010 will truly separate the boys from men,” said Arun Agarwal, ceo, Alok Industries. “Because of price fluctuations there will be a supply base which will try to sell cheap, but the question is will they deliver?”

“I agree raw material cost going up was the major issue. Fortunately, it's a global issue and not restricted to Pakistan only,” said Azim Sattar, director, AL-Abid. “With Pakistan and India among the largest suppliers in this category, the competition and progress of the cotton crop is a vital issue worldwide. “

There is good news with bright spots and optimism in the industry. According to Aaron Stewart, creative director, Sferra, “The market is really picking back up. We saw it first in the major markets: Chicago, New York, L.A.; but now it's really picked up across the United States, including in the middle of the country.”

“We feel 2010 will be a strong year as we are getting significantly higher sales forecasts in these categories from U.S. retail sector,” noted Sattar.

“The overall climate is already picking up,” said Agarowal. “This segment is seeing healthy growth. Alok was a pioneer in MXL technology and created new standards for wrinkle free. We are in the works with another technology which will create new standards for sheets.”

“As a fairly young company, Blissliving Home has continuously been able to grow our business year after year – including 2009,” said Mareike Finck, marketing manager. “Most of the growth [in sheeting] came from retail business with consumers that purchase an entire look, including a duvet set, decorative pillows, possibly a throw blanket and a sheet set. We are a design-driven brand and take pride in the design elements such as embroidery details worked into our sheets.

“We have continued to grow throughout the recent economic downturn. Our customers have come to expect a level of quality and value from us. We don't want to cheapen the product,” Goodrich said. Thomas Lee markets better bedding under the PerfectCale label.

“Everyone's ready to spend on home,” added Stewart of Sferra. “We're being asked for bright, new fresh and different products. One of the things that is happening is a still a basics story, but away from the off-white and taupe to more modern looking shades of grey.”

At Home Source, a new licensed line for the Italian brand Diesel is being introduced. The brand will have an edgier and more European flair, according to the company, with unique prints and colors. Home Source also produces Vera and Portico brands, according to Scott Sorgeloos, vp sales. The company has long focused on bamboo products, Sorgeloos noting that recent government warnings about bamboo were not an issue for the company. “We're experienced in this business and have been compliant since 2004,” he said.

Whatever the new trends, everyone expects to see some increases in prices at the retail level, but suppliers are crunching the numbers to see how they can minimize the impact.

“It's true that our customers are willing to pay a little bit more for the quality they've come to expect. But even then, there's a limit. You have to ask yourself how to best handle it — do you decrease your margin and keep your pricing or increase it slightly and see how that goes,” said Goodrich.

Retailers playing in this category also showed signs of strain, with single-unit stores, warehouse clubs and department stores showing double digit declines. It is a wake-up call for many, as they readjust their entire home areas. Direct-to-consumer stayed the course, while closeout/variety chains lost only 1.5% of volume buoyed by consumers shifting down market.

“Retailers narrowed down their lines in both width and breadth of offerings,” said Frank Snow, vp merchandising and operations, Royale Linens. “They are more streamlined both top to bottom and side to side, and are calibrating their offerings. They are now being very selective.”

One change Snow predicts is that there will be more differentiation with grades of cloth. “For some time, thread counts of 300, 400, etc., were collapsing on top of each other. I think you will see a separation of the products,” he said.

One of Royal Linens' projects: a warp denier product of 100% polyester with 100% cotton fill.

“The retail landscape is shifting,” said Agarwal. “Linens 'N Things going away is an old story. What is more important is, because of pricing pressure, smaller players are reducing their shelf space in this category. Natural gain will come to those retailers which are perceived as “destinations” for sheets.”

Distribution Channels ($millions)
2009 total retail sales: $1.725 billion
down 4.7% from $1.810 billion in 2008

2009 2008 % change
* Other includes interior designers, military exchanges and other channels
Discount department stores $897.0 $923.1 -2.8%
Home textiles specialty chains 250.1 271.5 -7.9%
Mid-price chains 324.3 343.9 -5.7%
Department stores 39.7 45.3 -12.3%
Off-price chains 62.1 63.4 -2.0%
Variety/closeout 53.5 54.3 -1.5%
Other* 31.1 36.2 -14.2%
Direct-to-consumer 36.2 36.2 0.1%
Single-unit specialty stores 15.5 18.1 -14.2%
Warehouse clubs 5.5 18.1 -14.2%
Total $1,725.0 $1,810.0

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