Bath Products (2003): For a battered segment, breaking even is a victory
January 25, 2005,
NEW YORK — In a year that saw the demise of one major mill and the bankruptcy of another, compounded with increased direct importing by retailers and deepened price deflation in bath towels and bath/scatter rugs, the bath products industry struggled to stay flat. It nearly pulled it off — with a modest 1.4 percent decline in total retail sales to $3.45 billion in 2003.
Some stood to gain at Pillowtex's expense. In towels, Springs was the biggest winner, having grabbed the largest pieces of the defunct company's business. Similarly in bath rugs, Pillowtex's exit freed up enough business to plump sales at Springs and Mohawk. It also made room for Lacey Mills, last year's Top Five list's newcomer in fifth place with $24 million.
But with the disappearance of Pillowtex from the supplier landscape came some important repercussions.
According to research by WestPoint Stevens, in 2003, "A worldwide capacity reduction in towels due to Pillowtex's demise resulted in major shifts in sources of supply, especially in the fourth quarter."
As Pillowtex's prominent brands — Royal Velvet, Charisma, Fieldcrest and Cannon — began disappearing from shelves for good, dozens of suppliers scrambled to fill those gaps with look-alike and new product. Many retailers tried their hand at going directly overseas, especially for bath towels.
This, combined with other issues, resulted in further price deflation of product, particularly in bath and bedding goods. While the number of units sold remained unchanged or increased, price points declined.
"A lot of the lowering of total retail-dollar-sales expectations is not due to unit sales," said Dan Harris, vice president of marketing and product development at Nile, Ill.-based Revere Mills. "Retail prices (and margins) have continued the downward trend and devaluation of the product in the consumer's mind."
WPS research noted that the rate of towel units sold increased at a faster pace than the rate of towels in dollars.
"In terms of dollars, the price of towels has dropped, which is ludicrous when you think that 99 percent of them are made of cotton, and that the price of that commodity has spiraled upwards worldwide all year," said Vivie von Walstrom, director of design and marketing at Foot Hill Ranch, Calif.-based Venus Textiles.
Added Arnie Stevens, vice president, Scottsboro, Ala.-based Maples Rugs: "Overall, prices in towels and bath rugs are not going up. You aren't getting more retail for the towels and rugs. Margins are tough. It's just that rugs can get a better margin than the towels."
Sugar Valley, Ga.-based Mohawk Home noticed a tip on the promotional side of the business in 2003 but expects the pendulum to tip the other way this year.
"As the pocketbooks and tastes of the American public change, so does the merchandise balance," said Merle Johnson, vice president, marketing, Mohawk Home — which in 2003 was the number one bath rug company with $172 million in sales. "As the economy improves, the pocketbooks will loosen, and we anticipate the top end of the merchandise mix within each store's assortment to begin to tip the balance back from the promotional mode."
Last month, Wal-Mart admitted that last year retailers got carried away on price deflation, "leaving some dollars on the table," according to senior vice president, finance and treasurer Jay Fitzsimmons. The company expects overall deflation to slow this year, with the advantages of sourcing better leveraged by building more quality into existing price points, he said.
Such seemed to already be the case in the other two major bath product categories last year — shower curtains and accessories — both of which maintained price integrity by offering customers value-added incentives.
Shower curtains rose 6 percent in terms of 2003's merchandise mix, growing to $535 million from $350 million. And bath accessories gained one percentage point to $432 million, from $420 million.
"There might have been a slight decline in bath towels with the shake-up of WPS and Pillowtex, and a slight increase in accessories and shower curtains," said David Grazi, president of the bath division at Lakewood, N.J.-based Town and Country Living. "You can attribute the increase in shower curtains and accessories to all the new innovation in fabrics and materials at affordable prices."
New York-based Croscill Home Fashions, in the past two years, has stepped up its importing of soft goods, including shower curtains, "to offer better quality of product and still be able to meet the price our customers expect and can sell well," said Carl LeGreca, vice president, merchandising and marketing, bath products and decorative accessories. "Where we once had to down-spec fabrics (for shower curtains, window treatments and bedding) to meet price points, we've now been able to bring more to the product because we're importing more finished product in soft goods."
Barry Leonard, president and CEO of New York-based Ex-Cell Home Fashions, said he sees sales in shower curtains "continuing to move forward. They feature more value-added treatments, like embroidered and appliqué looks, and the consumer understands that there is more value with these extras. In the past, shower curtains were mostly printed, and today those styles are declining at a fairly rapid pace. Now the quotas are off the category, and we can import from China."
Within the bath accessories category, Central Islip, N.Y.-based Creative Bath Products sees shower hooks "continuing to grow at significant rates," said Rick Lipton, national sales manager.
This is not to say suppliers don't have hope for a turnaround in towels and bath rugs.
"The towel business will get fixed in 2005, after the retailers figure out they are not importers," said Salo Grosfeld, president of Miami-based J.R. United. "Then the best product developers and marketers will run the business, and there will be some semblance of order to the business. You won't pay $3.99 for a giant, heavy towel but, on the other hand, you won't have to pay $3.89 to buy the matching wash cloth. What a joke."
Maple Rugs' Stevens sees bath rugs already starting to get a second wind at retail with additional placement for new items and better advertising programs. "The stores really like the margin they are getting out of the rug business, and a lot of effort is being put behind that," he said.
Stevens said he sees retailers making more room on their shelves for a broader offering of bath rugs in more colorways than just those that coordinate with towels on the selling floor and more free-standing looks.
Distribution Channels (in $billions)
2003: $3.45 billion
-1.4% Decrease over 2002
|2003 %||2003 $|
|1. Discount department stores||48%||$1.656|
|2. Home textiles specialty chains||18||0.621|
|3. Mid-price chains||16||0.552|
|4. Department stores||6||0.207|
|5. Off-price chains||3||0.104|
|8. Warehouse clubs||2||0.069|
|9. Single-unit specialty stores||1||0.035|
|10. Home improvement centers||1||0.035|