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Cecile Corral

Bath Pushed Back to Basics

New York — While it’s obviously always better to gain sales as opposed to slipping a notch, bath category suppliers might consider themselves lucky that 2007 finished off a somewhat status quo sales year — with total industry sales dropping 1% to $3.699 billion from 2006’s $3.737 billion — in a period of few shifts in distribution or merchandise mix.

Considering the economic environment this year, suppliers might even look back fondly on 2007 results.

The top five suppliers in the four main bath product categories — towels, rugs, accessories and shower curtains — suffered a collective 8% decline in sales in 2007. While not entirely representative of the heavily fragmented total bath industry, these numbers demonstrate that even the most powerful players lost significant business last year.

In the first six months of 2007, there existed a pseudo-comfort zone for bath suppliers. Yes, prices continued their climb in raw materials, namely petroleum used in the production of synthetic fibers for bath rugs and materials like resin for bath accessories, as well as in gasoline to deliver products from overseas. But in hindsight, those woes would seem less horrific than what the months to come would bring — and continue to generate — in stringent economic times.

Not only are raw material prices still going up, but consumers are being more cautious about their spending, hanging on to their towels and bath rugs a little longer before switching them out for new styles.

When they finally do replace their worn wares with new pieces, they are reaching for more promotional goods and more basic varieties — circumventing the full coordinate groups that demand a larger investment.

“This is an environment where you have to do so many things to remain competitive, because you just can’t rely on lower raw material prices,” explained Arnie Stevens, vp at Scottsboro, Ala.-based Maples Industries, the country’s second largest bath rug supplier with $120 million in category sales last year — flat from 2006.

“The biggest thing to deal with right now is being competitive,” Stevens continued.

Domestic rug manufacturer Maples is trying to keep its assortments appealing with the company’s recent purchase of a high-tech Chromajet printer for its printed rug offerings.

Pricing issues — for raw materials, production, and selling to retailers — are at the crux of the problem, suppliers agree. Bob Weiss, director of sales and marketing for Central Islip, N.Y.-based Creative Bath, called the situation “a disaster.”

“All prices are going up, everything is going up. Every time we place an order with a resource in China, we get a price increase,” he said. “There is no easy solution. And gasoline prices will be $4 a gallon this summer.”

As Weiss pointed out, suppliers are forced to pay higher costs for raw materials, manufacturing and shipping, but most — if not all — retailers are declining to accept higher prices for products, a move that would distribute the expense load.

Using mixed media and less pure resin is one way of alleviating these pressures. Top bath accessories supplier Allure Home Creation, which posted $83 million in accessories and $78 million in shower curtain sales in 2007, is taking such measures.

And even then, the company is being forced to raise the prices it quotes retailers, said Gabrielle Colquitt, vp, design and marketing. “We’re trying to maintain our price points, but in some cases we have to raise them because we have no choice,” she said. “It varies by product and retailer.”

Colquitt added the price of resin is “quite expensive” lately.

“[Retailers] want us to absorb all of the increases…I think everyone wants to be cheap, cheap, cheap,” said Rae Ellen Blum, vp, national sales manager of New York-based Cobra Trading Co. “But we have to go for a better market. We can’t all look like Wal-Mart.”

She added that some of Cobra’s smaller independent retail customers have begun buying container-loads: “Containers of one design in a multitude of colors, just to compete. Can you believe that?”

Dennis Fein, business director of floor coverings for Welspun USA, refers to such fashion-stifling attitude as “a malaise of complacency.” Retailers are being very conservative, “rightfully so,” he said, and as they become more concerned about inventory turns, that prudence comes at a price.

“Fashion suffers initially,” Fein explained. “The retailers are going to really focus on commodity basics which don’t necessarily give you that pop in sales drive … You stick to commodity basics because they have less downside risk, but they also have less upside opportunity to them, too.”

Welspun, the second largest bath towel supplier, reporting $235 million in sales in 2007, broke into floor covering in February with a broad debut of about 40 different bath rug offerings in both natural and synthetic fibers.

In line with his take on the industry’s direction in the current economy, Fein said Welspun has developed “very innovative basic commodity goods. One example that stands out is the introduction of our proprietary high-grow cotton rugs that coordinate with our high-grow cotton towels, made using a proprietary yarn system Welspun has developed.”

Such innovations in the bath rug business abound “primarily because of higher imports in the natural fiber segment,” said Ajay Anand, managing director of fellow Indian bath rug manufacturer Faze Three Ltd., based in Mumbai. But one factor keeping growth in check across the bath business is an equal lack of innovation in the bath towel side of the business, he said.

Arguing that point might be Niles, Ill.-based Revere Mills International. Revere, which manufacturers many of its bath towels in Pakistan but also sources from China, Turkey and India, said its overall business in bath has grown, although admittedly not as rapidly as in the past, according to Elaine Aschenbrand, director of marketing and product development.

Aside from ditching fashion to a degree and remaining stiff on prices, retailers are being faulted for not doing enough to “romance” the bath business — especially when it comes to the accessories segment — to help boost sales again.

“The stores don’t make our category exciting,” said Carl Legreca, president of the bath division at New York-based Croscill Home Fashions, the third-largest bath accessories company, with $45 million in sales last year. “They buy the same six pieces and don’t know how to romance it to the customer. They limit the offerings too much and show no newness or excitement to their shoppers. It’s boring. They need new ways to merchandise accessories than just lining them up like soldiers on the shelf.”

The search for improvements in the pricing situation has no timeline — it is expected to only get worse this year. Resourceful suppliers are finding other ways to compensate. For some, it means expanding their retail customer base beyond U.S. borders.

Creative Bath, which was among the top five in 2007 with $55 million in bath accessories and $34 million in shower curtains, recently shipped domestically made products to new customers in Saudi Arabia, Australia, Romania and Mexico. “They tell us quality and pricing from China is a problem — the quality is down and the prices are up,” Weiss said. “In that respect, the devaluation of the dollar has certainly helped our export business.”

Weiss said Creative Bath has exported in the past, but has recently experienced a spike in demand.
Embellished towel manufacturer Avanti Linens is another bath supplier stretching its reach. The company recently forged a partnership with a Russian distributor to retail its wares in countries experiencing healthy economic growth, such as some eastern European nations.

And via its acquisition of the major European bath rug company Pana Textil in October, the rapidly growing Faze Three Ltd. is poised to take advantage of business opportunities in robust European markets, while still seeking to grow its programs in the United States.

Distribution Channels

($millions)

2007 total retail sales: $3.699 billion; down 1% from 2006

 


2007

2006

% change

Discount department stores

$1,886.8

$1,868.5

1.0%

Home textiles specialty chains

651.0

673.0

-3.3

Mid-price chains

643.0

662.7

-3.0

Off-price chains

146.5

149.5

-2.0

Warehouse clubs

74.3

75.1

-1.1

Department stores

70.5

74.5

-5.4

Home improvement centers

37.4

37.4

0.0

Single-unit home specialty stores

36.4

37.1

-1.9

Other*

153.1

159.2

-3.8

Total

$3,699.0                    

$3,737.0

1.0%   

* Other includes home improvement centers, military exchanges and gift/home accent stores.

 

Merchandise Mix

($millions)


2007

2006

% change

Bath Towels

$1,849.80

$1,868.50

-1.00%

Bath/scatter rugs

925

$934.30

-1

Shower curtains

522

523.2

-0.2

Bath accessories

370

373.7

-1

Tank sets

32.2

37.4

-13.8



METHODOLOGY

In determining product category sales figures, as well as determining retail sales for those categories by channel of distribution, the editors and research department of Home Textiles Today used data compiled from a variety of sources, including publicly filed financial reports, vendor sales information compiled by the editors, and information provided by retailers and home fashions suppliers. The research was compiled by Cecile B. Corral, product editor; and Kay Anderson, director of market research.

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