ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Sunday, January 5, 1997 TAG: 9701070003
SECTION: BUSINESS PAGE: 6 EDITION: METRO
TYPE: ECONOMIC FORECAST
SOURCE: JEFF STURGEON STAFF WRITER
The region's textile industry is expecting a good year in 1997. The reason: Americans have an appetite for soft goods for the home and clothing and the nation's economic health assumes consumers have money to spend.
The theory is this: Consumers held back during the past two years, meaning jeans are getting faded and fashions need replacing. Also, strong home sales sends shoppers to store's home-goods aisles.
Textile executives are relieved that a temporary, but painful rise in raw materials prices that peaked in summer 1995 appears to be over. Their main challenge this year and probably for years to come is to satisfy bargain-hungry consumers, whose preference for buying at sale prices has squeezed profit margins bedsheet thin.
"Ninety percent of consumers think if it's not on sale, they paid too much," said an Atlanta-based spokeswoman for Kurt Salmon Associates, which advises textile executives.
This is changing the way companies do business. Since they can't easily raise prices, companies make money by saving it in production, distribution or other steps involved in making and marketing their goods.
By the end of 1996, clothing prices were expected to stand about a half of a percentage point lower than in 1995 and nearly 2 percent lower than in 1994, said Carl Priestland, economist of the American Apparel Manufacturers Association in Arlington. Prices overall actually went down.
One way to save long-term is to invest in technology. Companies aren't expected to significantly increase layoffs, though use of offshore production is or will need to be part of every major company's strategy, said the Kurt Salmon spokeswoman, who asked not to be identified.
In the Martinsville area, all this is expected to inflate sales for large clothing makers such as Tultex Corp. and the Bassett-Walker unit of VF Corp.
But these gains are coming partly at the cost of small, local contractors. In the face of lower international trade tariffs, they are hurting.
Chalaine Inc. in Vinton closed its dress-sewing operation and laid off about 16 employees about two months ago. A three-person staff performing embroidery remains. It couldn't compete with lower-priced, foreign sewing shops.
"I had no choice. I would have gone into bankruptcy," said Charles Leslie, president and general manager. "When NAFTA puts you out of business, you're going to do it."
He referred to the North American Free Trade Agreement, a 1994 treaty that will gradually eliminate trade barriers and tariffs among the United States, Canada and Mexico. A separate accord negotiated in July 1995 under the General Agreement on Tariffs and Trade calls for similar trade-liberalizing steps worldwide.
Russ Quesenberry, owner of Russell Apparel Corp. in Radford, a clothing contractor under similar pressure, gave this example.
In 1995, a customer paid him $19 per dozen for knit women's pants that his employees cut, sewed and finished. In 1996, he told the customer he would need $23 per dozen, reflecting his higher costs. Most everything from thread to insurance has gone up at Russell, which isn't related to Russell Corp., the large Alexander City, Ala., clothing maker. But the customer offered only $16, reflecting its greater access to lower-paid sewers outside the U.S. The customer told him it could have Mexican workers do the job for $12 per dozen.
Quesenberry's work force is down to 60 from 160 three years ago, and he also blamed NAFTA.
"The only way I see out of our predicament would be if the government would pass some laws" restoring tariffs, Quesenberry said.
But these are better times for companies that design, make and also sell clothing.
"We're optimistic about the outlook for 1997," said Tultex spokeswoman Kathy Rogers.
Two reasons stood out, she said. The company, with about 3,000 workers in the Martinsville-Henry County area, is raising the popularity of its brands while keeping costs controlled, she said.
Bassett-Walker, with about 3,500 area employees, also predicts a good year.
"The consumer is willing to buy," said Carl Reynolds, the company's personnel manager.
Burlington Industries Inc. of Greensboro, N.C., which makes carpet in Glasgow and owns Bath County-based home furnishings maker Bacova Guild Ltd., predicts a small rise in sales to follow an off year in 1996, spokesman Bryant Haskins said.
LENGTH: Medium: 84 linesby CNB