Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, March 26, 1993 TAG: 9303260254
SECTION: BUSINESS PAGE: A-11 EDITION: METRO
SOURCE: GEORGE KEGLEY STAFF WRITER
DATELINE: MARTINSVILLE LENGTH: Medium
TULTEX OUTGROWS FLEECEWEAR
Tultex Corp., a 55-year-old maker of sportswear, has become a marketing company, gaining 30 percent of its sales from products it sells but doesn't make itself."We are no longer just a fleecewear manufacturer," John Franck, company chairman, told the company's annual shareholders meeting Thursday. Today's image is "of a brand-new company."
Tultex, a maker and seller of polyester/cotton sweatsuits two years ago, has expanded dramatically to sell jackets, caps and T-shirts, according to Charles Davies, president.
The company's acquisitions last year of Logo 7 Inc. and Universal Industries - both firms licensed to market, but which do not manufacture, sports apparel with team logos - helped boost Tultex earnings 62 percent to $17.2 million, the executives said. Sales jumped 44 percent to $503.9 million.
The sweatsuit business is growing, they said, but it is expected to be only 55 percent of total company sales this year.
The company has evolved into three major business units, with the original operation now known as Team Tultex. Logo 7 is in Indianapolis and Universal Industries is in Mattapoisett, Mass.
When Tultex added decorated T-shirts to its product line, the company aggressively entered the licensed sports apparel business, Franck said.
Former University of Virginia star Shawn Moore, now backup quarterback for the Denver Broncos and spokesman for the company's Discus Athletic brand, came to the stockholder meeting. Troy Aikman, Dallas Cowboys quarterback and Super Bowl most valuable player, is promoting the Logo Athletic brand.
Tultex's fortunes are now closely enough tied to sports team-logo apparel that a possible major league baseball strike in 1994 could hurt the company's spring business, Davies said.
Also of concern is that Sears, Roebuck and Co. has accepted a 7 percent price cut by the Lee sweatsuit brand of Tultex competitor VF Corp. That will take $25 million of sales away from Tultex in 1994, according to Davies. But he said he's optimistic that the sales will be replaced "or we may even get Sears back" by next year.
Davies said the company is concerned about the prospect of higher inflation from higher government spending in 1994. Other worries for next year, he said, are possibly higher interest rates, more government involvement in business and the prospect of less free trade. He supported the North American Free Trade Agreement, facing a fight in Congress.
Team Tultex business doubled its earnings last year, Davies said, but sales were $10 million short of expectations while costs were higher because fringe benefits, especially group health claims, jumped $2 million.
The company's distribution center is taking longer than expected to reach the projected level of annual savings, the president said, but it will add to earnings this year and will bring more in 1994. By comparison, he said the acquisition of Logo 7 is worth at least 120 percent of its price and the distribution center is worth 80 percent of the payment.
Logo 7 and Universal together hold the No. 2 market share for all licensed sports apparel, Franck said. The company's strong competitors are heavily tied to single megabrands but they lack flexibility, he said, and Tultex must "make our diversity a strength." More company sales are under "familiar private label programs," he said.
Analysts are predicting the company will earn from 75 to 95 cents a share in 1993, Franck said. That compares to last year's earnings equal to 56 cents per share.
Tultex plans to reduce its long-term debt of $118.4 million, now "on the high end of our comfort zone," the chairman said. He told the stockholders they can expect to see women and minorities represented in more management posts and on the company board. Tultex has never had women or minority directors.
Dominion Trust Co. of Roanoke has set a target price of $12 per share for Tultex stock in the next year and a half, said Stephen J. Bowery, a vice president. The stock is undervalued at $8.50 per share, he said.
The executives said the only anticipated change in employment is the addition of about 100 jobs at a contract packaging operation for the Discus Athletic brand and for T-shirts to be moved to two new Martinsville warehouses from Winston-Salem, N.C.
The stockholders re-elected nine directors and Lathan M. Ewers, a Richmond lawyer, a new board member. Three veteran directors - R.P. Buford, C.W. Lawhon and V.M. Galbo - have retired from the board.