Sales on the rise, but there's a catch
Don Hogsett -- Home Textiles Today, January 12, 2004
Fueled mostly by robust gains at a handful of ferociously aggressive mid-size players, and getting a further boost from others who picked up business after the collapse of rival Pillowtex, composite sales of the nation's 14 largest home fashions suppliers edged ahead by 2.8 percent in 2003, to $7.5 billion.
But that only tells part of the story. Specifically, dollar sales that were held in check in recent years by rampant price deflation have been pounded down by retailers' velvet fist.
Indeed, unit sales may tell a sharply conflicting story of still considerable consumer demand. "It's the wholesale costs that were lower, which is something one should look at when one considers the industry results," said Jerry Hanauer, chairman of Pacific Coast Feather, the nation's fifth-largest producer. Pacific Coast's 2003 sales of $353 million were unchanged from the prior year.
Echoing the sentiment is Bert Shlensky, CEO of Sure Fit, No. 14 at $170 million. "It's my dollar sales that were flat, but my unit sales were up closer to 20 percent. That's what skews everything and presents a lop-sided picture of this entire industry."
That kind of onerous price deflation, coupled with the influx of low-cost imports and the increasing number of retailers buying direct — goes a long way toward explaining the minimal gain in year-over-year sales of the Top 15 producers over the past several years. Indeed, at $7.5 billion, sales of the Top 15 have climbed just 10.8 percent over the past seven years, from their low-water mark of $6.8 billion recorded in 1996, an average annual gain of a little more than one percentage point.
Skewing comparisons with past rankings, was last year's protracted collapse of Pillowtex Corp., a textiles titan which had recorded 2002 home fashions sales of $937 million. With doubts about the continued viability of Pillowtex surfacing as early as 2002, some of that company's sales had started migrating to other companies as early as that year, with even more shifting during 2003.
Perhaps the biggest surprise of this year's ranking is the appearance of two new "stealth" companies, Keeco and American Pacific. Those companies have been swiftly building their business over the years, but quietly and under the radar, avoiding both unwanted attention and unwanted competition. The two underline the seismic shift taking place in the American and global textiles industries — both are nominally U.S. companies, but both import their entire product range from plants in China.
Keeco debuts this year in the No. 11 spot with an estimated $193 million in sales, up almost a third from $145 million last year. American Pacific falls not far behind, into the No. 12 spot, with 2003 sales estimated at $185 million, up 19.4 percent from 2002.
Tellingly, both Keeco and American Pacific had their origins importing hand-made quilts from China, virtually inventing the entire category. Both have since diversified into a broad array of bedding items. And now American Pacific is starting to attack the major mills on ground they once called their own — with an array of licensed product that now includes Nautica, Liz Claiborne and Dockers.
Moving more quietly, but no less effectively, Keeco has been pushing itself as a supplier of private-label products for retailers, and has been pounding away at less trafficked channels of distribution, including QVC and Home Shopping Network.
Another stellar gain, in 2002 as in 2001, is CHF, a company once given up for dead, but revitalized by the husband and wife team of Frank Foley and Joan Karron. Rolling out new programs and breathing fresh life into Donna Karan Home, CHF pushed 2003 sales up by 26.6 percent, to $195 million, nailing down the No. 10 spot.
Italicizing the see-saw nature of 2003, with sales experiencing unprecedented volatility, fewer companies posted increases in sales last year, and more recorded declines. During 2003, eight companies made gains, down from 11 the preceding year; and five headed south, compared with four during 2002.
Home Textiles Today's Top 15
|Est. '03 sales||'02 sales||percent change|
|*revised upwards from an earlier estimate of $2.05 billion in 2002 sales.
|$2,400||$2,190*||9.6%||Putting the pedal to the metal through most of last year, especially following the demise of Pillowtex and the bankruptcy of WestPoint Stevens, Springs leveraged its own strengths, and a major acquisition, into a double-digit increase in home fashions sales. Springs results measure sales of soft home fashions products, and exclude results of the hard window coverings division, which generated roughly $450 million in additional sales last year. The major beneficiary of the death of Pillowtex, Springs used the added business to overcome weakness in the second and third quarters that brought most other players to their knees. The acquisition of the Charles D. Owen blanket business adds about $110 million in annualized sales.|
|$1,656||$1,777||-6.8%||In a make-or-break year, the nation's second-largest home fashions producer continued to watch its sales slide and losses mount, and was ultimately forced into bankruptcy. Holcombe T. Green Jr., majority owner, chairman and CEO, stepped down, ending a controversial tenure. Chip Fontenot, president and COO, was named interim CEO, and later given that position on a permanent basis. Waiting in the wings is a troika of bondholders poised to take control once the company emerges from Chapter 11, including investor Edward Lampert, majority owner of Kmart. On the product front, WestPoint unveiled a new concept for a towel wall and updated its core Vellux blanket program.|
|$655||$633||3.5%||Climbing back on the M&A bandwagon after taking a year off to digest and absorb a fistful of earlier acquisitions, Mohawk mid-year bought out the tufted bath rug business of Georgia-based Brumlow, adding about $22 million in annualized sales. Out to supplement that with some organic, internal growth, Mohawk introduced its new Mohawk Select label, opening up a new channel of distribution. Mohawk said goodbye to the Chris Madden designer license, but added three new designers to its portfolio: Raymond Waites, Pamela Scurry and Sara Nicol.|
|$374||$438||-14.5%||After making modest gains at the end of '02, Dan River's core home fashions business spiraled down through 2003. Sales at the company slid at a double-digit pace as its core bed-in-a-bag franchise continued to lose ground under increasing pressure from low-cost imports. Its Martha Stewart Everyday business took a hit as Kmart shuttered hundreds of unprofitable stores. Looking to cut costs and bring production in line with demand, Dan River shuttered two home fashions plants — weaving and cut-and-sew — and later laid off 80 workers. Dick Williams retired as president and chief operating officer, succeeded in those posts by Tom Muscalino. Dan Hammer took over as sales and marketing chief.|
|5||PACIFIC COAST FEATHER|
|$353||$353||0%||"It has been a very difficult year," said Jerry Hanauer, chairman, made all the more so as the company walked away from some large but unprofitable pieces of business. "We have given up two very large chunks of business on the basis of reverse auctions — and we're talking significant, eight-digit programs, each more than $10 million. But we are very fortunate in that we've been able to replace it, and with more profitable business." The demise of Pillowtex, he noted, had little impact on last year's sales. "Very little impact. I was really quite surprised. Our mattress pad business is very strong, so maybe it's had an impact there."|
|$293||$309||-5.2%||Slipping for a second straight year, following a 1.9 percent decline in 2002, sales dropped off in a broadly punishing environment for full-price retailers and their suppliers, as Americans held on tight to their wallets and sought out low-cost product. "The good news in all this is that we have some hot new bedding we've been bringing in from China for about four months," said David Kahn, president and CEO. "And our window business has had a huge rebound."|
|$237||$210||12.9%||As much as it likes building sales and making money, Franco cherishes one thing even more — its privacy. This has enabled the company to fly under the radar for years, steadily building its business without attracting too much attention, or competition. Franco continues to maintain its strong, historical base in kitchen textiles, but has been steadily diversifying into bed and bath categories, and has become a growing force in sheets lately, much to the surprise of some sheet suppliers. Indeed, this year Franco breaks into HTT's ranking of the nation's five largest sheet suppliers, with an estimated $95 million in sales of sheets and pillowcases.|
|$230||$200||15.0%||Still moving up the growth curve, sales climbed higher at a double-digit pace, and Maples leap-frogged over the competition to nail down the No. 7 position, up from No. 10 in 2002. Igniting the growth, said Wade Maples, CEO, was a surge in the company's bath rug business following the collapse of Pillowtex. "Our bath business increased much more than accent and area rugs, and that's a significant change for us." Gearing up its plants to handle stepped-up sales, Maples has broken ground on a 50,000-sq.-ft. addition to its Scottsboro tufting plant, a move that will eventually bring total square footage there to about 1 million. Also in the works is a dye house expansion, new robotic finishing and high-speed tufting.|
|9||HOLLANDER HOME FASHIONS|
|$228||$211||8.1%||"I'll take a repeat of 2003," said Leo Hollander, chairman. "Not only were we up for the entire year, but during the first six months we were down 14 percent. So you can imagine the phenomenal second half we had." Only a small part of that was fall-out from the demise of Pillowtex, he added. "Pillowtex didn't help that much. We had a good increase in down, and that you put to bed in February. Where we picked up from Pillowtex was in bed pillows." To handle the new business, Hollander is expanding its plants in Toronto and Pennsylvania, and moving mattress pad production from Pennsylvania to Toronto. Also in the works is an expansion in Chicago, from 80,000 square feet to as much as 180,000 square feet, "depending on which way we go," Hollander added.|
|$195||$154||26.6%||Rolling out new programs and building up others, CHF remains on a solid roll, with three big roll-outs scheduled to ship just before year's end, said Frank Foley, CEO. "Our big problem is getting them out the door." Donna Karan Home finally hit its stride, "and the back half of the year was sensational, even though it took us a little while to get it moving. Our Peri window business has had phenomenal growth, and we successfully launched Peri window hardware, which has been great. And our juvenile bedding business has been doing very well." Helping to boost sales were a handful of new programs, including Donna Karan Home window, Peri window hardware, Hello Kitty bedding, Nick Munro bath, and Ocean Pacific bedding in both adult and juvenile styles. "You add a couple million here, a couple more there, and it all adds up to a pretty big percentage increase for a company our size."|
|$193||$145||33.1%||Keeco has been flying under the radar and diversifying its lines to include sheets, comforters, bed-in-a-bag, windows, decorative pillows and table linens. Bedding is still the biggest chunk of sales, accounting for roughly 75 percent of Keeco's business, about $150 million, said Bill Tauscher, CEO and co-owner (along with founder Leonard Kee). "Quilts are the biggest piece of bedding. We're not a great player in sheets, but we expect sheets will grow dramatically in 2004 and 2005 with the quota changes." Recently, Keeco has become a major importer of bed-in-a-bag, and four placements at Wal-Mart have helped drive sales. Additionally, Keeco continues to grow its bedspread, decorative pillow and comforter ensemble business.|
|$185||$155||19.4%||Still growing rapidly and diversifying its lines since it was acquired by Greg Block in 2001, American Pacific is another of the "stealth" suppliers. It breaks into the Top 15 ranking as it continues a major roll-out of designer license programs in bedding ensembles. Building on the continued success of its Nautica branded home fashions line, American Pacific added a Dockers program in the spring of 2003, followed by the fall launch of a Liz Claiborne program. "We've certainly seen the benefit of bringing a recognizable brand name from apparel into home," said Kaela Forker, vice president of sales. While it started out as a supplier of imported quilts, the company's fastest growing product over the past 18 to 24 months has been comforters.|
|$182||$186||-2.2%||"Boy but this one was challenging," said Louis Rudy, president. "What was bad, obviously, was the second quarter. We had never anticipated that kind of fall-off in business." After forecasting $43 million in sales for the quarter, the company had to settle for $29 million — a shortfall of almost 33 percent. "On the positive side, we reacted quickly with temporary layoffs and slowdowns, so we didn't end up with bloated inventories." And then it moved from famine to feast. "Two things happened: First the passing of Pillowtex, and then retailers' realization that they had no inventories. Suddenly, we couldn't make the product fast enough. We literally had to double our production in a matter of weeks. It was a challenge to get it out the door."|
|$170||$170||0.0%||"We hit the wall last year and broke our record for growth. We were exactly flat with 2002," said Bert Shlensky, CEO. A large part of the stunted sales, he said, is relentless price deflation at the hands of the nation's big retailers with all their buying clout. "We were 20 percent ahead in units and flat in dollars. What does that tell you?" Otherwise, he said, businesses see-sawed between channels. "Our business has shifted to the Bed Bath & Beyonds, the Linens 'n Things and the department stores, and that business has been very good. But mass merchants were soft, and we lost some placement at Wal-Mart. And we didn't have some of the big roll-outs we had last year to people like Mervyn's."|
|$162||$169||-4.1%||"I think like almost everyone else we're glad to put this year behind us," said Loren Sweet, CEO. "We held our own in pillows, we had a dismal year in throws, and our window business was flat. But that mostly reflects some price erosion, some big programs that were re-priced downward due to auctions. This is our first down year in memory, and while the sales numbers were down, I'm pleased with where we finished the earnings."|
Top 15 composite snapshot
Sales gain of 2.8 percent — but not for all
|*For purposes of creating an apples to apples comparison, results for the former Pillowtex Corp. are not included in 2002 results. The company had not filed any financial results for any part of 2003 with the SEC. If Pillowtex is included, total sales of the Top 15 declined in 2003 by 5.3 percent from $7.9 billion.
Source: Home Textiles Today market research and public documents.
|Total sales (in $mil.)||$7,507||$7,300|
|Number of sales gains||8||11|
|Number of sales declines||5||4|
|Number of sales unchanged||0||0|
|Newcomers to Top 15||2||2|
Highs and lows
Winners and losers in 2003
|Top three sales gains||2003 %change||2002 %change|
|NR: not ranked
Source: Home Textiles Today market research and public documents.
|Top threesales declines|
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