Overview of the Textile and Apparel Industry

Weekly Corporate Growth Report, Mar 28, 2005 by Dolbeck, Andrew

The Textile and Apparel industry covers establishments that manufacture fiber and fiber products, fabrics, and finished fabric products such as clothing. Textile products include yarn, thread, twine, and woven and knit fabrics. The textile manufacturing sector also includes companies engaged in various treatments for fiber and textile products such as tex tile dying, coating, and waterproofing. Finished textile products include apparel, leather and fur products, curtains and draperies, canvas sheeting, and other fabric items. The industry covers both standard manufacturing operations and contract manufactures that make clothing and other products from materials owned by others.

The US textile industry is facing competition from overseas production. In March 2005, a consortium of textile industry and labor groups, including the National Cotton Council, asked U.S. trade officials to invoke trade law provisions in response to a significant increase in Chinese apparel imports. Woods Eastland, chairman of the National Cotton Council, also called for early monitoring of US trade data so that trends in imports can be responded to on a more timely basis.

On average, exports of apparel from China increased 546 percent from January 2004 to January 2005, the group claims. The increase comes after quotas on the import of Chinese textiles were lifted under negotiated free-trade agreements.

The textile and apparel industry primarily generates consumer goods. Consumer spending has been impacted by a number of factors in recent years, including high fuel and energy prices and general economic and political uncertainty. Cautious consumers are most unlikely to spend of products they consider unnecessary or frivolous, which includes keeping up with the latest fashion trends in clothing and accessories.

The 2004 holiday shopping season was not as strong for the apparel industry as it could have been. The industry was hit with a number of challenges, including high prices at the gas pump, unusually warm weather (impacting the sales of cold-weather items), and an increase in popularity of consumer electronics as gift-giving items.

In order to remain competitive, many apparel manufacturers are seeking to expand their operations through acquisitions, not only in their own industry, but in related areas such as retail sales outlets and the rights to brand names for popular clothing lines. Recent acquisitions include Liz Claiborne buying premium fashion T-shirt vendor C&C California, Phillips-Van Heusen obtaining the Arrow brand, and Tommy Hilfiger acquiring the Lagerfeld trademarks. For the apparel segment of the industry, diversification by brand, channel, and product line is key to consistent earnings growth.

Sources: Knight-Ridder Tribune Business News, US Dept. of Labor, Value Line

By Andrew Dolbeck

Editor