Fabric sources brace for tough year
By Joan Gunin and Gary Evans -- Furniture Today, January 26, 2009
HIGH POINT — Despite some optimism that the economy may begin to brighten later in 2009, most fabric mill executives are taking no chances and doing everything they can to prepare for a tough year.
Covington is looking at cost management to weather the current financial storm.
“No one, including the financial gurus, has a good grasp on the future of the economy, said President and CEO Mark Kahan. “We must plan on a continued deep recession until the turnaround is evident. This puts a premium on good inventory management and cost containment.”
The U.S. dollar has lost some of the ground it has gained in recent months. Since the bulk of Covington's contracts are traded in dollars, Kahan said it takes hard work to take advantage of price fluctuations on the supplier side.
“In general, trends in exchange rates impel greater consideration of domestics relative to foreign mills than has been the case in recent years,” he said about the situation.
Covington works to stay competitive by offering new designs that are “fresh and stand out as great values even in austere conditions.”
Designer Marion Murray had a well-received line at Showtime in December, he said, adding that Covington plans to build on this momentum to strengthen its position as a fabric converter.
Covington also is gung-ho on doing more with American mills. “This can mean faster and more efficient conversion from design to product.”
Eyeing new opportunities, Covington plans to launch a “green” line later this year. This program will be geared to the contract segment for inside/outside use.
At LTM Textile Resources, Sales Manager Tony Sutton said, “We had a fairly good Showtime. We had some great sample requests, both from the furniture segment and the RV segment.
“But I think the first half of this year is going to be very challenging. I see some improvement in late spring, early summer, maybe even stronger in the fall, but I don't think a major turnaround (will take place) until 2010.”
Bartson Fabrics President Steve Thompson sees business worsening before the second half shows any signs of improvement.
“Consumer confidence has been badly shaken and it will take some time and a bit of good news before it recovers,” he said.
Despite the current downturn, Thompson said opportunity lies with “sticking to what we do best: good style, good color and good service.”
And, while petroleum prices have decreased, Thompson said offshore yarn prices never caught up with last year's rise in oil prices. As a result, he sees more inflation in material costs ahead.
“There are still tremendous inflationary forces in a number of countries,” he said.
At Westgate by American Decorative Fabrics, President Jack Cobb does not expect the economy to pick up until the second or third quarter.
“The key is to manage your costs and remain healthy so that when the economy turns, you're still around to take advantage of it,” he said. “Companies that don't manage their costs will not make it through this downturn.”
To stay competitive within a shrinking world market, companies have to “manage costs and offer better-styled products. One without the other is not enough.”
According to Cobb, the weakening value of the dollar against the Chinese yuan was a big factor impacting profitability over the last few years.
At SRA Fabrics, principal Shelly Rosenberg is trying to balance the need to keep inventory lean while providing customers fresh designs.
“It's important to introduce new products in these times,” he said, noting that there was a scarcity of new product on his last trip to China.
“It's our responsibility to develop something on our own if we can't find it. But you have to do it on a limited basis and it's got to be a good value.”
Rosenberg said he has “no crystal ball. But it's going to be a very difficult year. I think we're going to see more guys go (out of business).”
One of today's challenges, he said, is that a mill or manufacturer “can do everything right” in terms of frame and fabric application “and, if it doesn't sell, you don't know if it is business conditions or if the product is not right.”
Richard Hansling, president of Swavelle Mill Creek Fabric, said his company “has been aggressive in the (furniture) category” and, as a result, has increased its market share.
“Our business is flat, which is probably heroic.”
Hansling has noticed that manufacturers are “overly conservative when times are difficult and (retail) floors don't change as dramatically. They haven't sold a lot of their previous inventory, so they try to re-merchandise it and they're a little more risk averse.”
Although conservative, upholstery producers “are still looking for something special out there.”
Swavelle Mill's Creek ability to service customers quickly gives the company an advantage when manufacturers begin to narrow their list of suppliers during tough times, according to Hansling.
“If someone wants 300 or 400 yards, we can ship it the next day,” he said. “We continue to service the marketplace. Our customers need us more than ever right now and if we perform during these difficult times, we know that we'll get a large share when business opens up.”
A challenge for Roth & Tompkins Textiles has been the tightening of credit markets, said John Tompkins, president and owner.
Previously, companies like his were extended large lines of credit by CIT, GE and other credit houses, but economic conditions have dried up the free flow of money.
“When your cash flow is restricted, it makes your moves on the chess board somewhat limited,” Tompkins said.
Citing strong sales in the hospitality industry, Tompkins said there are “significant pockets of business out there” that look good for the coming year. But overall, he expects 2009 to be flat and plans to cut overhead where ever possible, stay lean and mean “and watch every penny.”
Roger Berkley, president of Weave Corp., said the main challenge facing the fabric industry is simple: “There are too few orders. People aren't buying anything.”
He said in addition to more housing foreclosures, 2009 is likely to bring new turmoil in commercial real estate, bankruptcies in the retail community and mall closings.
Berkley said some of the initiatives proposed by the President Obama should provide stimulation to the economy. But at the earliest, it will take 120 to 180 days to get money flowing again.
“I have to say I'm not optimistic about 2009,” Berkley said. “On the other hand, I hope I'm wrong. What it all comes down to is: How deep are your pockets? Companies with deep pockets and a tolerance for pain will probably make it.
Asked if there are any positives for 2009, Berkley said, “It'll be over in 12 months.”
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