Restructuring Activity Picks Up - Brief Article - Statistical Data Included

Bobbin, Jan, 2001

Late 2000 brought several restructuring announcements and one major Chapter 11 bankruptcy protection filing for the apparel and sewn products industry. Following is a look at the activities of three major players.

VF Strategically Shifts Several Coalitions

VF Corp. announced in mid-November that it would make significant changes within its various coalitions to position the company to achieve its long-term earnings growth target of 8 percent to 10 percent. In conjunction with its restructuring actions, the firm planned to take a charge of $120 million to $140 million to its fourth quarter earnings.

In the work wear area, VF will discontinue its napery and certain customized and catalog programs, which served primarily small businesses and accounted for about $40 million in annual sales. Mackey McDonald, VF's president and CEO, said the exit of these businesses will "reduce the complexity" of the firm's work wear business, and allow it to focus on more profitable, higher volume opportunities. In mid-October, VF announced the formation of a new coalition, VF Imagewear, which is comprised of both its knitwear and work wear businesses, which previously were run as separate coalitions.

VF also is changing its jeans strategy in Japan. The firm is transferring the license for its Wrangler brand to Lee Japan Company Ltd., a subsidiary of Edwin Company Ltd., which has marketed the Lee brand in Japan since 1987. Because of this decision, VF will be taking a charge on the loss of its investment in its VF Japan operations. McDonald said the shift of both jeans brands to its Japanese licensee better fits VF's "total portfolio" approach to brand management, and will leverage Lee Japan Company Ltd.'s strong local market knowledge, retail relationships and brand management experience across both brands.

Other actions VF is taking to reduce costs include the consolidation of distribution centers in the United States and Europe, a general reorganization of its Latin American jeans business and a restructuring of its international intimates business.

The November restructuring announcement followed several upper management changes announced by VF in mid-October. VF named Eric Wiseman, previously president of its Bestform intimate apparel unit, to be vice president and chairman of global intimate apparel, reporting directly to McDonald. John Schamberger was named vice president and chairman of the firm's North and South America Jeanswear and Playwear Coalitions. In addition, Terry Lay, vice president and chairman of the firm's International Jeanswear Coalition, received added responsibility for implementing "best practices" and new systems company-wide.

DuPont Combines Apparel, Textile Businesses

Effective this month, DuPont will begin to take a more integrated approach to the textile, apparel and sewn products market through its new DuPont Apparel and Textile Sciences organization.

The new business unit, which is expected to account for $3 billion in annual sales, will focus on apparel, home textiles and related businesses. DuPont's Lycra (R) brand elastane, nylon textile and Dacron branded specialties and fiberfill businesses, which previously operated as separate businesses, will fall under the new organization. The company reported that the change will enable it to provide a more streamlined and competitive offering to the market.

Pillowtex Files for Voluntary Bankruptcy Protection

Home fashions giant Pillowtex Corp. filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in mid-November, citing the need for "breathing room" to create a sustainable capital structure, enhance its manufacturing operations and improve profitability.

The company has received a commitment for $150 million in debtor-in-possession financing, and reported that it intends to operate in the normal course of business during the Chapter 11 case.

The Dallas, TX-based firm has been carrying a heavy debt load since it acquired Fieldcrest Cannon in 1997, and also has struggled with the implementation of an enterprise resource planning system. Efforts to strengthen the company by exiting unprofitable businesses and improving its inventory positions have been challenged by a slow sales environment.

This past summer, Pillowtex reported a softness in sales in the institutional market because of import competition, and sluggish sales with some regional department store customers because of high inventory levels. The situation did not improve in the fall, as the company reported a rapid slowdown of orders in September.

In late October, Charles M. "Chuck" Hansen Jr., a 35-year veteran of the company, resigned as chairman and CEO, positions he has held since the early 1990s. His resignation followed poor third quarter results, including sales that were down $58.4 million to $357.4 million compared with the third quarter of 1999. Moreover, Pillowtex's net loss for the first nine months of 2000 was $38.1 million versus a loss of $9.7 million in '99,