Dan River Readies to Ramp up its Growth
August 21, 2006,
New York — Only nine months out of bankruptcy and eight months after it was bought by Indian textiles producer GHCL, a slimmed-down, freshly motivated and tightly focused Dan River says it's ready to ramp up aggressive growth on a newly built global platform and reclaim its place in the top tier of U.S. home fashions producers.
The company is not thinking small. Nor is it taking its time. Sanjay Purohit, a Motorola veteran and now Dan River ceo, states calmly, flatly, and without a hint of bravado in his voice, that Dan River will grow in the next three years to at least $2.5 billion in annual sales through a combination of aggressive organic growth and strategic acquisitions.
That statement is saying a lot for a company whose sales, like those of most of its peers, have tumbled over the past few years, battered by low-cost offshore imports, and further pressured by relentless price deflation as U.S. retailers write their orders with a pen in one hand and a hammer in the other.
Slow to abandon U.S. manufacturing and partner up with offshore suppliers, Dan River's home fashions sales had dwindled to about $250 million in 2005, only half the $482 million in home fashions sales the company had rung up in 2001. And they've fallen even further so far during 2006. But that's about to change, Purohit told HTT.
Next year, he said, sales are realistically targeted to jump in the range of 70% as Dan River trades up its products, moves into window and bath, buys other U.S. home fashions companies, and starts selling its products into the European marketplace.
If that sounds impractical given the battered state of the U.S. industry and an increasingly worrisome U.S. economy, consider what Dan River's parent has already accomplished: GHCL has grown from about $122 million in sales during 2005, to a projected $600 million this year, up more than four-fold in just 18 months, propelled largely by acquisitions, including Dan River.
And sales into the European market are a major component of the new template for growth that Dan River and GHCL have designed. Creating a new paradigm for the U.S. home fashions industry — actually reinventing one that had fallen out of use — GHCL is gobbling up European home fashions retail chains, creating a ready-made customer base for at least some of Dan River's products, especially as the mill moves upscale with higher counts and premium fabrications.
Little more than a month ago, GHCL acquired Roseby's, a British chain with more than 300 stores and $250 million in sales. And in the works are the purchase of two more European chains, one in France and another in Italy.
No company, the business school axiom goes, operates more profitably than a dedicated supplier, selling to a specific customer, cutting out sales and marketing costs, streamlining distribution, taking the guesswork out of product development, and down-sizing back-shop functions. In fact, the model worked well for years in the United States, the most notable examples being Fieldcrest, at one time owned by Marshall Field in Chicago, and Kellwood, which for years had virtually one customer, making apparel for Sears, Roebuck.
“They will certainly be our customers,” said Purohit, in effect keeping the dollars in the GHCL family and becoming a major profit center for Dan River as well as its parent. Moreover, he said, “we will probably benefit also by picking up the European trends quickly, and that will help us to serve our U.S. customers.”
And it's not just retail chains that GHCL is buying to partner up with Dan River, using cash from the ultimate parent, Dalmia Group and its rich portfolio of companies. Look for Dan River to move into window and bath over the next few months, said Purohit. “We have a very realistic target of $200 million in window and bath sales for 2007.”
That will likely happen through acquisition, confirmed Purohit. “Our parent is willing and able to spend the money for acquisitions in this country.”
Giving Dan River a substantial boost, in addition to its parent's deep pockets and its appetite for growth, are two key resources in India, observed Purohit: an abundant supply of low-cost labor and an abundant supply of cotton.
And then there are the less tangible assets that GHCL brings to the table. If Purohit recites a mantra, the words most often heard would likely be 'team' and 'speed.'
“Nothing happens without a team of people working together with a single objective in mind,” said Purohit. “In fact, what we are really doing is creating a global company, a global team, with global manufacturing, global sales and marketing, global design. It simplifies everything. We have an eight-man leadership team, and it runs the entire company. That's it, just eight people. No cumbersome layers of bureaucracy getting in the way and slowing down the process of making decisions and getting things done.”
The other key, said Purohit, is speed. “Either you are faster or you are dead. And we are very fast.”
In fact, only eight months after GHCL bought Dan River, the company has completed a sweeping transformation of U.S. operations and integration with its new parent. Since the first of the year the company began, and completed, the transition from a manufacturing to a design, marketing and distribution company, moving all its spinning, weaving, cut and sew to India and elsewhere within a matter of months.
Virtually all of Dan River's U.S. manufacturing has already been shuttered, with the last plant scheduled to close next month. Back-shop functions, like billing, have already been transferred to India.
“You have to move fast. You don't have a choice,” said Purohit. “The longer it takes you to transform a company, to integrate its operations, it creates confusion — confusion in the workplace and with the customers. And the longer it takes, the worse it gets, the less successful the integration will be. You develop morale problems, you lose the sense of shared purpose, and you lose the spirit of teamwork. That's why, when we bought Dan River, we set up a 120-day timetable. We moved fast, but not recklessly, and we took care of all the people losing their jobs. And we actually came in ahead of plan.”
They also came in ahead of plan in another crucial area. “On an operating basis, we are profitable,” said Purohit.
“The reality is, either you are profitable or you close down. And we achieved profitability this month. No one today can wait for years. So this was our first test, and our first real milestone.”
Purohit confirmed, “Now our future is secure and we can keep growing. And that growth will be very considerable, and it will come very quickly.”
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