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Yarn Market

A Mixed Bag Of Business For Spinners

Jim Phillips, Contributing Editor

S pinners report mixed results heading into the final quarter of the year, with some pleasantly surprised at the volume of business that is coming in, and others wondering where any orders are going to come from.

"Our business volume has been positive since late spring, especially the finer yarns," said one North Carolina-based spinner. "During the past several months we have recognized that more customers are more optimistic about the US retail picture, and about their businesses. Overall, we are pleased with our business, even though we realize a late-fourth-quarter (Q4) slowdown is typical. We prepare as best we can."

While generally pleased with 2009 results, especially in light of global economic conditions, the spinner was somewhat reluctant to offer an optimistic assessment of early 2010. "Considering our business expectation for Q1 2010, I think back to this time last year, at which time our business was good. We anticipated the slowing demand into the holidays, followed by gradually increased opportunities to begin in late January as typical. That business finally began to develop in April."

Sustainable products are in particularly high demand for this particular spinner. "Organic cotton, recycled polyesters and cotton continue to grow in importance. Comfort fibers, like modal, are increasingly important. Performance yarns create some exceptional opportunities."

Geographically, Central America and California continue to account for the bulk of orders. "Central America is fundamentally important for the US spinners, and very important to our success," he said. "The region produces quality apparel, but more importantly, the region uses speed-to-market as a competitive advantage. Our West Coast market, and its connection as a CAFTA-DR [Central America-Dominican Republic Free Trade Agreement] supply source, is also important."

In successfully competing with low-cost countries, innovation and speed-to-market remain the key differentiators for his company, as well as for many other US manufacturers, he said. "Our product is made specific to order, which requires a lot of involvement with customers and the market. Although product development and innovation drive our business, meeting the required lead time is vital. Being more complex and doing it faster are unique issues to manage."

Orders Still Below Forecast

For some other spinners, business, while not as bad as initially feared, is still well behind forecasts. "Business is still off from traditional Q4 levels and slightly below forecast," said one specialty spinner. "September was strong. October is starting off behind original expectations." For holiday orders, he said business has been "decent on the consumer products side, weak on orders from manufacturers."

This spinner does not see demand increasing over the balance of the year. "We are taking a conservative approach," he said. However, he said he is "cautiously optimistic that, starting in February, demand will improve."

Financing, as well, continues to be an issue for this specialty spinner. "We have to watch many of our customers like a hawk. Bank and financing credit is still tight, whether or not the company's track record is good."

Pricing, as well, has been an issue. "It is hard to pass along fiber increases. We have little incentive to promote when margins are thin to begin with," he said.

Over the next few months, this spinner sees "affordable home fashions, niche products, industrial and export markets" as "key opportunities."

A Georgia spinner noted that business at his company was "at best, fair. We are still running full, but orders are erratic at best." His company is still predicting it will be later in 2010 than most expect before orders pick up. "We are hoping for better results, but we are cautiously optimistic."

He said it has been hard to gauge the amount of holiday orders coming in. "I'm not sure of any at this point. Everything we sell is pretty much day-to-day, week-to-week, with not much long-term." As well, he said, no product stands out as being in high demand. "We still continue to try and develop something new. That is all that the retailers want." Pricing continues to be at rock bottom for this spinner.  Further, he said, "as new crop comes on-line, we expect raw material to be higher."

As for operating schedules, while one North Carolina spinner reported a five-day schedule as typical, the Georgia spinner said his plant is operating full-out. "But we are seeing little to no margins."

And, as with his North Carolina counterpart, financing is an issue. "It's still a very tough situation. Retailers are also slow to pay, and this stretches out the terms. Our customers don't want to pay us until they are paid."

While spinners want to be optimistic that business conditions will turn around early in the fourth quarter, they are hesitant to get their hopes up too high. One spinner summed up the general consensus: "Consumer demand is terrible. Until this improves and shoppers are not scared to buy, we see that this downturn will continue."

October 2009


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