Home Textiles Today Dec 6 issue

Monday, December 6, 2010

THE BUSINESS AND FASHION NEWSPAPER OF THE HOME TEXTILES INDUSTRY

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hometextilestoday.com

| Vol. 31, No 22 | $8.00

COTTON CRISIS Can vendors sell it? Page 2

Will retailers buy it? Page 4 Is cotton really that expensive? Page 5 Thoughts on fabrications. Pages 22-23

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Home Textiles Today

December 6, 2010

COTTON CRISIS

Cotton Crisis: Industry Grapples with New World Order

BY HTT STAFF

A

s Jan. 1, 2005 will be remembered by the industry as the day the last barriers to unlimited imports fell, October 2010 will be recalled as the moment when China’s factories slammed the doors closed, albeit temporary.

For a period of about three weeks, many of China’s factories were neither offering quotes on business nor accepting orders. But the entire system is under strain, and the numbers aren’t pretty: • Cotton futures in China up 70% this year; • Labor costs in China up 20% to 25%; • India’s ban on the export of raw cotton pushed cotton futures to a new high in New York last week, with prices up 53% for the year; • The impact of Pakistan’s floods resulted in a 22% decline in cotton exports between July and October, and total fiscal year exports could drop 25%, according to the Karachi Cotton Brokers’ Association; • U.S. inventories of cotton in ICE warehouses are down 91% from June, according to Bloomberg.

“The days of cheap apparel and soft home are over,” said Emanuel Weintraub, president of consulting firm Emanuel Weintraub Associates, which works with both retailers and manufacturers. “We’re in a world where producers have more leverage than the buyers.”

He predicts a 20% to 30% hike in retail prices on cotton products next year.

Factories are now demanding longer-terms on programs as opposed to program-to-program contracts. Industry executives interviewed by HTT agreed there is no “new China” into which production readily can shift.

As retailers, suppliers and manufacturers grapple with the new world order after more than a decade characterized by

price deflation, HTT surveyed several players for their perspective on the situation.

Abhishek Industries LTD.: The Trident Group Joanne Krakowski, U.S. sales and marketing manager

“The continuous rise in the price of cotton is gaining proportions of a tsunami for home textile manufacturers. All the cotton indices are at its all-time peak, reflecting the high prices and demand for the commodity. This year there has been setback in cotton crops reported from Pakistan and delay in crop arrival in India has only added to the worsening situation.

“The demand from the retail side is still strong across all textile products globally. Cotton prices have shown a consistent upward trend throughout the year 2010 and even now when a limited arrival of a new crop has started in some cotton markets of the world, the trend remains unabated and cotton is trading at its all time high level.

“The impact is not restricted to any particular manufacturer or segment of the textile industry but is global and is felt more acutely in articles where value addition is rather low and raw material forms a significant part of the total product cost time towels.”

Elrene Home Fashions Bryan Siegel, chairman and ceo

“I have not seen a commodity market as unstable as we are currently experiencing. The domestic demand from countries like China and India has never been so great. As a result, we are seeing a major run up in the cost for all raw materials not just cotton. We are experiencing increases in polyester as well. I am sure we are going to see increased retails as early as spring ’11.”

Foreston Trends Dick Gould, vp, sales

“Everyone is kind of skittish

Related Content Showtime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Blanket Makers Grapple With Poly Pricing . . . . . . . .8 The Fabric of Our Lives – And It Isn’t Just Cotton . .22 Cotton Pickin’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

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over what is going on. It is erratic. We’re just getting increases for practically every order we send out. Every month, for the past nine or 10 months, we’ve gotten an increase. We can’t submit an order until price has been verified. And [the price] is changing constantly. It has been very tough to deal with.”

“Retailers are being forced to accept the increases. It is going to be bad for them because they haven’t passed on the increases to customers. They’ve been absorbing them.”

“Cert ainly, we have lost business because of [retailers not wanting to accept price increases]. But suppliers can no longer absorb those hits, especially as frequent as [prices] have been [increasing].”

“Now we have to pass them on. It’s not a choice anymore.”

“And now retailers are going to have to pass them on, too, because they have to accept our price increases.”

“No one [retailers] tells me anymore than no one else [suppliers] is giving them increases. Everyone is, including our competitors.”

Hollander Home Fashions Beth Mack, chief merchandising officer

“From a production standpoint, the rise in cotton prices is giving rise to more use of blends and of 100 percent polyester.”

10 Years of Price Deflation for Finished Products

1990 • Average wholesale cost of an open-stock queen sheet (not set): $15.35. Adjusted for inflation: $25.67.

Open-stock bed covering: • 21.5% sold at wholesale $10$20. Adjusted for inflation: $16.73 to 33.47.

• 21.7% sold at wholesale of $30-$40. Adjusted for inflation: $50.20 to $66.94.

• 19.4% sold at wholesale of $20-$30. Adjusted for inflation: $33.47 to $50.20.

• 73% of bed covers sold open stock.

• 74.1% were cotton blends.

Bath towels wholesale prices: • 20.5% sold at $5-$5.99.

Adjusted for inflation: $8.37 to $10.02.

• 17.1% sold at $2-$2.99.

Adjusted for inflation: $3.35 to $5.00.

15.7% sold at $3-$3.99. Adjusted for inflation: $5.02 to $6.68.

• 15.0% sold at more than $8.99.

Adjusted for inflation: $15.04.

• 93.3% of towels sold were all cotton.

Keith Sorgeloos, president and ceo

“The escalation of cotton pricing is causing some challenges in the home textiles industry.

There is only so much de-specing of a product that can be done without losing its value proposition, so it will be interesting to see what happens with retails going forward into 2011 and, subsequently, if the possibility of rising retails affects demand of home textile product.

“It will also be interesting to see how cotton yields will develop a year from now when harvests are completed to determine if supply outweighs demand or if demand continues to outweigh supply. It surely does not seem that we will see cotton pricing below $1.00 per pound

• Opening price point at retail of a queen sheet set not on promotion at Walmart: $17.00.

• Opening price point at retail of a queen sheet set not on promotion at Bed Bath & Beyond: $29.99.

• Opening price point at retail of queen sheet set not on promotion at JCPenney: $50.00.

• Opening retail price point of a queen bed-in-bag set not on promotion at Walmart: $44.99.

• Opening retail price point of a queen bed-in-bag set not on promotion at Bed Bath & Beyond: $59.99.

• Opening retail price point of a queen bed-in-bag set not on promotion at JCPenney: $130.00.

• Opening retail price point of a bath towel not on promotion at Walmart: $3.50.

• Opening retail price point of a bath towel not on promotion at Bed Bath & Beyond: $5.99.

• Opening retail price point of a bath towel not on promotion at JCPenney: $5.99.

Source: HTT 1990 pricing report; HTT 2010 Market Basket report

anytime in the near future.”

Home Source International Inc.

2010

The John Ritzenthaler CO. Howard “Chip” Stiedel Jr., president

“Cotton’s cost increase, over long term averages, has been dramatic, substantial and sustained. It now presents enormous challenges for pricing and retails.”

Lintex Linens/ Espalma by Cobra Kurt Hamburger, managing director

“I have just spoken to a resource of many long standing years in Pakistan, who has informed me that he and other Pakistani mills are without cotton going forward. The reason for this is that the Pakistani crop was wiped out due to the floods.

“Pakistani mills are importing cotton from cotton brokers

and mills in India, but he has informed me that they are not getting the right prices from their Indian suppliers. I don’t know if premeditated or not but it does not put the Pakistani mills in a good position.

“It stands to reason that if American exporters of towels and other products for the home are continually being forced to pay higher prices, they must at some time make the difficult decision of raising their prices across the board.

They have no choice.

“Will that affect business? Yes, it will in the short term. American retailers – large, medium and small – cannot have empty shelves nor will they stop buying.

Eventually, they will come to the conclusion that they must buy at higher prices as they will not go out of business.”

SEE COTTON PAGE 4

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Home Textiles Today

December 7, 2010

COTTON CRISIS

What Retailers are Saying During the November round of quarterly reports, analysts pressed retailers about how they are responding to higher raw material, labor and freight costs. Here’s what they had to say.

especially in this type of macroeconomic environment.

“We’ve been able to enjoy improved access to merchandise across all of our major categories.”

JCPenney Mike Ullman, chairman and ceo

Bon-Ton Stores Bud Bergren, ceo

“There will be some price increases, but they will be minimal … We see a small impact in the low single digits for 2011.”

Gordmans Jeff Gordman, president and ceo

“I know that there has been much discussion on Wall Street with respect to cost pressures on merchandise inventories and a potentially negative impact on gross margins, particularly as it related to merchandise sourced from China.

“It is our belief that retail prices for the industry, overall, has and will increase commensurately, visà-vis cost increases.

“Fortunately for us, because we establish our selling price relative to that of our competition, we anticipate being able to preserve margins while hopefully experiencing incremental traffic due to our value-oriented positioning.

“We also think that our merchandise procurement strategy, which is based on the fact that we don’t engage in the practice of seeking mark down, advertising and other allowances from our vendor partners at the end of the season, works to our advantage,

“If cotton goes up another 40% or 50% or wherever it lands, there will be an impact on pricing, and it is important for us to have a competitive advantage… Some manufacturers are not even taking orders. That would imply [this will become] a much bigger problem in the second half.”

He added that JCP is “navigating” the problem with its suppliers, who he noted “may be having more difficulty” with cotton price increases than retailers currently.

But JCP’s ultimate goal is to “shield” shoppers from price increases as much as possible, he concluded.

Kohl’s Kevin Mansell, chairman, president and ceo

Kohl’s team “has found ways to mitigate” the problem via several efforts, such as “doing things like reverse auctions, and we’re expanding it. They are an aggressive way to get these costs to the lowest level,” he said.

Kohl’s is also “holding on to raw materials as long as we can” as well

Cotton Reaction COTTON FROM PAGE 2

Mohawk Home Bart Hill, general manager

Cotton comprises about 20% of Mohawk Home’s business.

“We are looking at things we can do with different fibers, blending poly with cotton, bulking, etc.”

“A significant piece of our business is natural fiber, imported out of India, and we are definitely seeing cotton prices at an alltime high – about a 30% to 50% increases – and that affects us in a couple of ways, for example, certainly the price of our rugs.”

But, he added, bath rugs are “indirectly impacted” by towel

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prices “because it affects the inventory and open to buy in whole bath department. When towel prices go up, it puts pressure on retailers. Even when they have to t ake ret ail increases that we have to push through, you are talking about less open-to-buy on the retail side. We are going to certainly have to respond with some price increases on the cotton side, but that then impacts inventory and retailers’ open-tobuy dollars. They can no longer buy as many units.

“We will probably increase retails, but that means there will be fewer units that we can push through because of the cotton inflation.”

as “continuing to consolidate our vendor structure overseas. We have a very concentrated supplier base as it is,” he continued.

“We are employing all things we know how to do to mitigate this ultimately for our customer. We believe we still have a consumer who is buying cautiously, so they are less likely to pay higher prices.

We will go out of our way so the customer doesn’t have to see the impact of those rising costs.”

Macy’s Inc. Karen Hoguet, cfo

“This is obviously a question that many of you have been calling about, and clearly there are pressures with the sourcing costs, particularly for the back-half of 2011.

And one of the things that you need to keep in mind is that we, both at Macy’s and at Bloomingdale’s, have the benefit of being more of a fashion retailer and having a higher fashion content in our merchandise, which means that the input costs represents a lower percent of cost of sales, and also it gives us more flexibility in terms of the production, locale, and also the materials we’re using.

“So frankly, we are in a relatively better position than many of our competitors.

“But this is where our increased collaboration with our vendors is going to pay off – both in addressing the sourcing challenges and working together to minimize those. And also, the col-

Next Creations Michael Vidra, president

“The situation at the moment is different in each country.

“China about 10 days ago eased up 1% to 2%, but prices are still up 20% to 30% compared to six months ago. It’s still very volatile and some people still cannot supply.

“From China we got a final quote on Nov. 8. We placed the order on Nov. 16. They demanded a 16% increase – in just eight days.

“Labor costs are also a problem. I have one owner I know, he was mandated last spring by the government to raise salaries 20%. He has raised them 40% over the last eight months just to keep his workers.”

Vidra noted there are more

laborations are giving us opportunity to reduce other costs of doing business together, which will help us to offset some or all of the increases in the costs of goods.

“I should also add that as you think about our private brands, while we’re on the subject, we have a terrific sourcing organization with very strong relationships with our manufacturing partners.

This, too, will help us minimize any impact we’re seeing.”

Target Kathryn Tesija, evp merchandising

“Cotton prices are up considerably from last year, as are synthetic materials. Apparel and soft home are where we are experiencing these cost increases.

“Cotton is up about 80% and synthetics up about 50%. These are some pretty hefty cost increases. I would say that translates into garments – and there’s a lot we can do to mitigate that.

Different efficiencies, how we cut the fabric, how we produce it.

“We’re working to design the best apparel we can but mindful of these costs. We do think some [costs] will get passed on in higher retails, but we don’t want to get to the point where we design apparel that isn’t appealing.”

TJX Carol Meyerwitz, president and ceo

TJX “is moving from a slightly down ticket to a slightly flat to up ticket. We take the inflation piece as a positive move for our business.

We just need to make sure we are

attractive occupations now in China for workers. “These people can now work inside in air conditioning. Why work in textiles?”

“India has cotton, but we see 18% to 26% increase on sheets.

“Pakistan has been a little bit less aggressive. One supplier asked for a 25% increase.

After de-specing it was still a 10% increase.”

Town & Country Living Neil Mandell, chief merchandising officer

“We’ve seen this happen in oil a few years ago, and the prices went back down – even though they did go back up again in the last few weeks or so.

“Many retailers do direct

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competitively price to what’s out there, and we will be.

“We try to keep a distance between ourselves and department stores. Average ticket going up is certainly a benefit to our comp and our average ticket.”

Stein Mart Inc. David Stovall Jr., president and ceo

“We are seeing some price increases, primarily affecting the second quarter of 2011, and we’re looking for ways to mitigate that impact, including working with our vendors on alternative fabrics and different sourcing locations.

“But our driver on pricing will continue to be delivering great value to our customers. And so, that will be the overriding decision point that we will make going forward.”

Williams-Sonoma Laura Alber, president and ceo

“We have seen increasing pressure on costs, particularly this last month, so it’s raw materials as you all know and I’m sure are aware of the cotton prices and then also labor rates in Asia.

“The good news is we’ve been very proactive in cost containment efforts and are still in the early implementation stages of some of these efforts. I mentioned them earlier, but I’ll just bring them back up again. So, both from a network design perspective also containerization and packaging, reengineering. So, yes, we see the pressure, obviously, and we’re building strategies to combat it and to continue to improve our profitability.”

importing, and they know firsthand what we are going through. Couple [cotton price increases] with increased transportation costs and factory limitations in China, for example.

A lot of factories are shifting to other commodity products the government feels is more essential than home furnishings.

Town & Country mostly uses all-cotton in its bath towels and kitchen towels and dishcloths as well as in segments of its bath line. He estimated roughly that “maybe 55% of what [in these product categories] is made of 100% cotton.” HTT HTT Editor-in-Chief Jennifer Marks, Product Editor Cecile Corral and contributing editor Jill Rowen contributed to this story.

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Home Textiles Today

December 6, 2010

Hard Numbers About a Soft Product

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otton doesn’t grow on trees ... but it does grow and therefore unlike manufactured goods, it is subject to a number of variables, both natural and man-made.

On this page is some basic data about cotton that puts the recent run-up in prices into some sort of a context. Most important is the historical pricing timeline for cotton, going back 30 years. While cotton in current dollars is as high as it’s ever been over these

past three decades, when inflation is figured into the equation, there’s a very different story. It’s not that cotton is the most expensive it’s ever been, it’s that cotton has been relatively inexpensive for the past decade. And so the price is high only relative to recent history, not over a longer period of time.

The two other charts on this page show where cotton is grown and where it’s used. Again, the perception of many people that the United States is the

prime player on both sides of that equation turns out to be inaccurate. As with many things in the global economy today, China is the No. 1 supplier and the No.1 user of cotton. And its Asian neighbors are very much in the picture.

When it comes to cotton, just as you have to separate the boll from the stems, you have to separate facts from fi ction to get to the heart of the matter.

HTT

Cotton Pricing 1980-2010 That Was Then, This is Now $2.50

Highest historical inflation-adjusted price

$2.48 in 1980

Cotton prices are at historical highs, but when you adjust the numbers for inflation it’s a very different story.

$2.25

Price* (per pound) Inflation-adjusted price** (per pound)

$2.00

*Source: National Council Council of America “A” Index, calendar year average **Source: Bureau of Labor Statistics Consumer Price Index Inflation Calculator

$1.75 $1.50 $1.25

Highest historical actual price

$1.00

Lowest historical inflation-adjusted price

$0.55 in 2002

$0.75 $0.50

Lowest historical actual price

$0.25 $0.00

$0.45 in 2002

1980 1981 1982 1983

1984 1985 1986 1987 1988 1989 1990 1991

Where the Cotton Comes From More than half of the world’s cotton now comes from Asia

4% Uzbekistan

16% Other

Source: U.S. Department of Agriculture, 2010 Estimates

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1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

2006 2007 2008 2009 2010

Where the Cotton Goes Unlike the good old mill days, very little cotton is used in the United States

26% China

7% Brazil 8% Pakistan

$0.93 in 2010

25% Other 42% China

2% Brazil 23% India 16% U.S.A

4% U.S.A

12% Pakistan

15% India Source: International Cotton Advisory Committee

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Home Textiles Today

Retail Briefs It’s official: Target Heading north

I

n the 1990s, Kmart tested international retailing in Mexico and then-Czechoslovakia and ended up retreating. Wal-Mart headed across the border and kept on going. Target, known for exercising prudence, did not follow.

That will change next year, when the chain will branch out into Canada – a move the company hinted at earlier this year and confirmed during its recent quarterly conference call.

“We expect to have new [smaller format] sites in 2012, and we also plan to open new sites outside the U.S., with stores in Puerto Rico and Canada,” said ceo Gregg Steinhafel.

JCP Creating New Retail Business

J

ust days after announcing the launch of two online retail concepts that have no ties to the JCPenney retail name, the company today said it will launch a new retail chain catering to the men’s big and tall apparel business.

Foundry Big & Tall Supply Company will debut an ecommerce site in April 2011, to be followed in May by 10 specialty stores. Over the next five years, the company plans to open 300 Foundry stores.

The chain will be housed under the company’s Growth Brands Division, which next year will create Gifting Grace (online giftware) and CLAD (online modern menswear).

Belk Investing $150 mil in IT

R

egional department store Belk Inc. will spend $150 million to overhaul its information technology infrastructure, a three-year process.

The project focuses on upgrading Belk’s merchandise planning and replenishment, store point-of-sale and e-commerce functions. The company plans to add approximately 75 IT positions at its corporate office here this year and next year in addition to the 39 merchandising positions previously announced.

Portico Expands at Sears Canada

T

he Portico Home + Spa collection of organic cotton bed and bath products recently added basic bedding made with organic cotton and filled with Lyocell Down, a blend of Lyocell and down.

Sears Canada launched the program in March with the fashion bedding and the bath collection. The brand is sold in 50 Sears Canada stores, including five storeswithin-a-store in Calgary, Montreal, Toronto, and Vancouver. In the spring of 2011, the program will be rolled out all Sears Canada department stores nationwide.

December 6, 2010

News

Global Goes Local at Showtime

BY CAROLE SLOAN HIGH POINT, N.C. — The global

textile market — whether for home furnishings, apparel, contract, industrial or whatever — is dominating the conversations and business activity at Showtime here this week.

The volatility of pricing, coupled with the availability of production, across all channels of distribution, has created a level of confusion not seen for sometime.

Orders from American customers — either at retail levels or jobber and furniture manufacturing levels — are being refused by suppliers. For those that try to go direct, they most often have less clout in negotiating pricing, availability and other elements.

In many instances, availability is the key point as suppliers have held on to inventories of cotton as well as other commodity products anticipating that pricing will soar even more than it has. The so-called shortage of cotton has

led to a demand for polyester to create new blends for home goods as well as apparel. Rayon also has escalated.

Even for companies that produce outside of China, the fiber pricing has been a major — but not sole issue. For many fabric companies, there are challenges in terms of yarn availability and finishing, among other issues.

See Page 11 for Showtime fabric introductions

“It’s a speculative environment,” said Mike Shelton, president of Valdese. “We’re seeing 25 to 30 percent increases in different aspects of the production. But one thing’s for sure.

We’re absolutely not compromising quality.”

For Jeff Thomases, ceo of Swavelle/Mill Creek “We see three to six months before prices come back to real levels.” The company has negotiated faceto-face with its off-shore suppliers and sees increases at 5 to 10 percent in aggregate after fac-

toring in other elements.

“We have to do things different and smarter,” said Rocco Simone, senior vp at Sunbury.

He noted that the company that produces only domestically is impacted by the availability of everything from fiber to finishing globally.

Tom Hilb, ceo of Heritage House, noted that pricing especially “is particularly difficult.”

The range for the company is 5 to 15 percent on all polyester product, and 15 to 30 percent on polyester/cotton with all cotton coming in at 50 to 60 percent more.

Labor costs, refusing orders to renegotiate prices and holding on to inventory at off-shore mills are major factors complicating the situation, said Jim Richman, ceo of Richloom.

For Victor, which is moving away from off-shore production, “we see our strategy as focusing on utilizing our yarn capabilities, and finishing as well as design and weaving,” said Jack Eger, vp. HTT

TexStyle Moves Ahead Under New Ownership

BY CAROLE SLOAN N EW YORK — TexStyle’s new

owner is out to change the profile of the company she purchased in September by expanding its product offering and adapting approaches to manufacturing.

K a r e n Wa n g , o w n e r o f Shanghai-based Bolan, pointed to expanded product categories as well as the use of outside designers to create prod-

uct for the growing product. In addition, Wang pointed to her manufacturing partners globally that will help the company both in terms of design, product mix and manufacturing technology. As an example, she pointed to her Bulgarian manufacturing partner that is No. 3 in Europe and the main supplier for Ikea as a potential manufacturing partner for the products sold in this country.

Wang purchased the com-

pany “as an opportunity to expand our Chinese manufacturing as well as focus on international sales and manufacturing in Portugal, Bulgaria, Indonesia, Vietnam and Pakistan.”

The Anderson Group had purchased TexStyle in 2005, and then Whispersoft in 2008.

It continues to own PerfectFit. The need to expand the design reach of the company, SEE TEXSTYLE PAGE 23

Donald Lorberbaum,75, Longtime Springs Exec NEW YORK — Services were held last week for Donald Lorberbaum,75, longtime textiles executive who died following a long struggle with pancreatic cancer.

Lorberbaum’s family owned a textiles company called Lawtex Industries that was purchased

by Springs Industries in 1979 in one of the first waves of consolidation in the industry. Springs renamed the company Springs

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Performance and it became a free-standing unit at a time when Springs had a decentralized structure.

Springs Performance became known for several specialized products, including mass merchant solid color sheets, juvenile bedding and novelty pillows and coordinates. Lorberbaum’s brother Robert ran the juvenile unit of the company.

Donald Lorberbaum eventu-

ally became president of an integrated Springs textiles division in the 1990s and retired several years later.

The death notice in New York Times called Lorberbaum “the ultimate merchant, and advisor, who could walk with kings and not lose the common touch.”

He is survived by three children, Steve, Gregg and Neal, eight grandchildren and his partner Beth. HTT

12/2/2010 5:24:36 PM

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Home Textiles Today

December 6, 2010

News

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Polyester Surge Causes Stitch in Textiles Vendors Still Upbeat on Blankets, Warming Devices

BY JILL ROWEN N E W YO R K — An unprece-

dented rise in the price of polyester sent suppliers into a tailspin just before the Thanksgiving holiday. All eyes were on China as prices rose about 49% in just a week.

Though prices have begun to drop since that fateful week, blanket makers who play in polyester are faced with the decision to buy high or wait to buy, with no guarantee that prices will fall back to their lower numbers. On top of yearslong complaints about cotton pricing as well as rising wool prices due to dry conditions in Australia and other regions, blanket makers are all working through significant raw materials cost. The bottom line: prices will go up at retail, with some vendors forecasting that consumers will see the results in the third quarter of 2011.

Despite the volatile situation many find themselves in, most blanket supplies that HTT spoke with had a positive outlook. The season is starting well, with many reporting good sales coming off Black Friday. In addition, trends such as plusher fabrics and new developments in warming devices that increase function, comfort and fashion are all attracting customers.

The Chinese proverb that wishes people a life in “interesting times” came true for Ross Auerbach, president and ceo, The Northwest Company, who found himself in Asia during the polyester blow up.

“It was really something to be there for this debacle,” he noted.

Like others, Auerbach is anxious to see the fall out — “historically, prices have gone down before Chinese New Year in February,” he noted — but Northwest is not sitting on its hands. “We are a market leader in throws and had to t ake a position,” he noted. “We have an obligation to service our customers and are buying, not waiting.”

Auerbach sees positive signs in China’s recent decision to put controls on food and cotton prices, hoping that will stabilize the economy more.

Auerbach projects a rise in prices for staple home products in the second half of 2011, and has one other concern: younger retail buyers.

“Buyers who haven’t lived through inflationary times are going to have to be educated on rising prices by their executives. These buyers are used to seeing prices go down,” he said.

Despite the upheaval, Auerbach is optimistic. “We’ve had a good year, and Black Friday sales were great for us. I’m very optimistic,” he said.

Another polyester player, Berkshire Blanket felt the disruption in the marketplace, according to Thomas Bowles, ceo. “There are a lot questions about how to deal with bids and programs and how much it will dip and when,” he said. While that plays out, he noted that the business of blankets continues, with retailers looking for “newer products that break

new ground.”

Making waves for Berkshire are higher pile products, with piles as high as 35 millimeters, which have had good sell through and have been a “big hit in the market,” he said.

“The market has been on fire for us; we’re very pleased,” reported Robert Christnacht, division manager, home, Pendleton Woolen Mills.

After an uptrend in blanket sales during last year’s cold winter, Christnacht reported that many retailers realized the benefits of focusing on the blanket area.

“They wanted to improve the quality of the blanket department to meet demand and stay on trend,” he said. The resurgence of an “Americana” trend has also helped Pendleton’s traditional designs see increased sales. The company is partnering with iconic brand Levi’s and with trendy retailer Urban Outfitters, for instance, both of which have attracted a younger, hipper customer for the brand.

“We face the same pressures as everyone: sourcing, quality and pricing,” Christnacht said.

“The currency devaluation of the U.S. dollar and draughts in Australia and New Zealand are impacting us. We’ve passed on price increases, but they have been minor due to our mill and operational efficiency.”

“Like everyone else, we’re planning as well as we can and hoping for the best,” noted Cheryl Morse, director, digital commerce, marketing, Ellery Homestyles.

The company is expanding its place in blankets with new products in its ComfortTech line which features 3M’s Thinsulate insulation technology. “There

hasn’t been anything like this in the market,” Morse noted. Ellery is offering a good, better, best assortment, with “good” debuting this month at Bed, Bath and Beyond. According to Morse, Ellery will also produce ComfortTech throws.

Warming devices are also attracting attention, with suppliers hawking the energy savings and newer technology.

“The need for energy savings, particularly in this economy are more top-of-mind than ever before. These products provide a way to turn down your heat and lower your energy bill.

So, this category has remained good in recent years,” said Jeff Chilton, president, sales, marketing, Perfect Fit. According to Chilton, the market has responded to innovation: “No one wants ‘the old style construction’ from the old days of electric blankets. We are definitely using better, prettier, plusher fabrics—not your ‘grandma’s blanket’,” he said.

“We participate in the ‘best’ category of this market with a patented ‘low voltage’ product,” Chilton explained. “We continue to hide our very thin wires for more comfort. There is one old electric brand in this category, so we see an opportunity with branding.”

Mike Fretwell, vp, personal care and wellness, Jarden Consumer Solutions (JCS), Sunbeam’s parent, calls the company’s approach to design for its collections “progressive.”

“Each season, we collaborate closely with our design team to infuse each of our lines with on-trend color palettes and unique, handcrafted prints and patterns that mirror the looks featured in Top of

Bed,” he noted. “This year, we introduced new design collections in our heated throw line, including new animal prints, contemporary damask patterns and classically inspired floral and plaid prints. Moving forward, we see design and color playing an even greater role in the 2011 heated bedding season.” This year, the company also introduced its LoftTec fabric and reversible Sherpa/RoyalMink throws.

According to Fretwell, Sunbeam Heated Bedding has also introduced a new merchandising/packaging direction in 2010.

“Through ongoing consumer research, we found fabric and softness are critical purchase drivers for heated bedding,” he noted. With that in mind, the company reusable tote bags, open window boxes and trendy ribbon belly bands. “Our graphics reflect a fresh, new look for this mature category with simplified feature statements and fresh, contemporary visuals that draw the consumer to shelf to learn more,” said Fretwell.

For Fretwell, JCS is better prepared then most in the midst of economic upheavals.

“JCS has a clear advantage over many of our competitors due to our size and sourcing expertise as well as favorable transportation rates from shipping companies,” he noted.

“The single biggest advantage JCS has over our competition is our factory in Waynesboro, Mississippi. We are able to avoid much of the increase cost of labor through automation and speed while ensuring we are able to meet our customers’ demands in season.”

HTT

FAO Schwarz Launches New Baby Room Décor Program at Babies “R” Us WAYNE , N.J. — FAO Schwarz

is launching a new line of baby items – including bedding collections for the nursery – at its Fifth Avenue New York store as well as in-store Babies “R” Us boutiques and online at both retailers’ websites.

Dubbed The Baby Collection from FAO Schwarz, the line is spans more than 130 items, including gift-able merchandise ranging from theme-

htt101201_008.indd 8

inspired nursery decor and matching bedding sets to keepsakes, apparel and “cuttingedge gadgets to whip up fresh food for babies.” Looks include classical, traditional and modern “enhanced with elevated fabrics, techniques and materials.” Prices range from $9.99 to $249.99.

The bedding and nursery décor collection in the line pairs “traditional design with

high-end fabrics and materials,” the company said. There are three signature patterns – Posy, Journey and Toy Box – available in bedding sets, blankets, crib sheets, changing pad covers, diaper stackers, hampers and more “so parents can create an entire nursery with one cohesive theme.”

The packaging features the recently redesigned FAO Schwarz logo and introduces

the character “Wit,” who was designed to add a fairytale element.

The Baby Collection is available at FAO Schwarz on Fifth Avenue in New York, all Babies “R” Us stores, and more than 30 “R” superstores nationwide as well as online at FAO.com and Babiesrus.com.

“The FAO Schwarz brand has long been synonymous with quality and innovation. We

believe that The Baby Collection from FAO Schwarz is a natural extension of the timeless product offerings it is known for and will further build on the brand’s trusted reputation and signature style,” said Karen Dodge, svp and chief merchandising officer, Toys “R” Us Inc., which acquired the exclusive rights to operate the FAO Schwarz brand in May 2009.

HTT

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10

Home Textiles Today

December 6, 2010

News

> hometextilestoday.com

Wal-Mart Offers to Take 51% of Massmart B ENTONVILLE , A RK . – After sev-

eral weeks of negotiations, WalMart Stores Inc. has offered to acquire 51% of the shares of the Johannesburg, South Africa-based Massmart Holdings Limited.

Massmart group operates nine wholesale and retail chains as well as one buying group.

The company’s four operating

divisions follow a model similar to Wal-Mart’s – high volumes and low-cost distribution – with 288 stores and 470 buying group members in 14 countries in subSaharan Africa.

The U.S.-based retailer scaled back its original plan to buy all of Massmart.

The price per Massmart ordi-

nary share is ZAR148 – equivalent to $20.67.

The offer represents a 19.2% premium to the 30-day weighted average price on Sept.

23, the last trading day prior to the indicative offer announced on Sept. 27, which was unanimously recommended by the Massmart board of directors.

The offer needs the approval of Massmart’s shareholders.

Offer documents are expected to be mailed to Massmart’s shareholders by Dec. 9, 2010.

“The due diligence effort we have conducted over the last eight weeks has underlined our confidence that this is a compelling combination that will create

significant value for both companies, and we look forward to participating in the regulatory process to complete this acquisition,” said Andy Bond, evp with responsibility for Walmart’s operations in the region, including the United Kingdom and Africa.

Added Doug McMillon, president and ceo of Walmart International: “The more we learn about South Africa and the surrounding countries the more we are convinced that this is an important region with attractive growth characteristics. This combination fits perfectly with our strategy to enter high growth markets in which we can apply our global expertise and generate strong returns.”

Massmart will continue to trade on the JSE Limited to provide Massmart shareholders with the ability to participate in the growth opportunity of the combined entity. HTT

Organizations Ready Showtime Events HIGH POINT, N.C. — Showtime

celebrated its 42nd event with an opening night party Sunday Dec. 5 with an industry cocktail party at The Factory in Market Square.

On Monday, Dec. 6 Merchandise Mart Properties will sponsor a social held in the Suites at Market Square from 5:30 pm to 7:30 pm.

WithIt will give a trend presentation on Monday, Dec. 6 at 10 a.m. and on Tuesday Dec. 7 at 2 p.m. In addition, the American Association of Textile Chemists and Colorists will discuss “Assuring Product Quality: The Importance of Testing” on Monday Dec. 6 at 2 p.m and on Tuesday Dec. 7 at 10 am.

ITMA also announced new members: Broderi Narin; Eroica Enterprises; Fiore Fabrics; Hangzhou Star Italy Synthetic Leather Co.Home Accents Fabrics; Moygashel; Palette Fabrics; Para; Regency Interior Fabric Specialist; Trimland Janaj Int.; Vinayak International; and Vision Fabrics, a new division of J. Ennis Fabrics. HTT Manhattan Properties.indd 1

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11/16/2009 3:28:48 PM

12/2/2010 4:42:04 PM

> hometextilestoday.com

Showtime

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1. Watercolor brushstrokes in Spring Meadow from TFA reflect the influence of Georgia O’Keefe, filament rayon/ polyester, $17.95.

2. Rhavi blends modern and traditional influences with a vintage look at Circa 1801, an ombre blend of spun rayon/cotton, $18.95.

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December 6, 2010

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3. American Decorative Fabrics features Ouvre from its Out ‘n’ About collection, one of the company’s debut collection of outdoor fabrics, enhanced performance polyester chenille, $8.95.

4. Zaire from Victor uses a woven pleat to create a multicolored stripe inspired by a woven African basket, cotton/ polyester, $13.95.

5. An exotic flowering tree inspired Craftex’s Muirwoods, a large scale design, acrylic/polyester/rayon/cotton, $32.

6. American Silk features Lisette with a ribbon effect using a rib weave, rayon/polyester/silk, $20.95.

7. Sunbury’s Magnifique, which uses the new Sunbury Touch proprietary finishing technology, is a frame design inspired by old world looks, cotton/Egyptian cotton, $22.

12/1/2010 5:43:59 PM

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Home Textiles Today

December 6, 2010

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1. Waverly’s intricately embroidered Jacobean design, Crown Jewel, is an open motif on linen/rayon, $18.95.

2. Zorro from Regal is inspired by contemporary pick-up sticks that use a variety of weaves to create different tones in fun colors, polyester, $11.95 3. Marissa, a print from Richloom’s Platinum division, reflects new interest in watercolor floral effects, flax/ rayon, $9.95.

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Showtime

> hometextilestoday.com

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4. Watercolor techniques influence the contemporary flavor of Flourish, a print from the Braemore division of P/Kaufmann, cotton, $13.95.

5. Heritage House highlights Emerson, an open woven influenced by embroidery techniques, polyester/cotton, $15.95.

6. The Trend division of Fabricut highlights its new Jaclyn Smith Home 2 Design No. 02097, a colorful print influenced by Suzani techniques and ethnic themes, linen/rayon, $9.50.

7. Russo, a design interpreted from Russian folk art and influenced with a twist of art deco influence, is given added luster with rayon chenille in the new collection at Swavelle/Mill Creek, rayon chenille/cotton/polyester, $13.95.

12/1/2010 5:49:01 PM

> hometextilestoday.com

Showtime

December 6, 2010

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8 A dramatic interpretation of classic paisley design with ikat influences highlights Valdese’s Soutine woven on the firm’s new tapestry warps, polyester/rayon/cotton, $15.

10. Kali Batik from Weave is a new interpretation of a Javanese wax resist process executed in intricate woven detail, rayon/cotton, $22.95.

9. Caprini from the Home Fabrics by Wesley Mancini collection is a dramatic design inspired by Miami deco influences woven on a tapestry warp, polyester/rayon, $14.95.

11. J.B. Martin highlights classical damask design with Medici Damask, a cut velvet rendition, cotton/acrylic, $29.95.

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12. Softline highlights Alpera, a scroll motif for window panels and fabric by the yard, polyester, $7.95.

13. Shalimar from MDS, inspired by the Shalimar Gardens flowers, mixes fashion-forward orange and blue on a cotton velvet with a wool embroidered 52-inch vertical repeat, $2 yard.

12/1/2010 5:54:57 PM

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Home Textiles Today

December 6, 2010

> hometextilestoday.com

PEOPLETodaY Sleep Studio Adds to Sales Force NEW YORK — Sleep Studio has

named Kelly Wall national sales manager and Charly Michelle marketing director.

Wall, an industry veteran with more than 25 years of sales experience in a variety of domestic categories, previously held national sales manager positions at Minette-Bates, Inc. and Biederlack of America. He will be working with the company’s sales representatives to further expand distribution.

“As we continue to grow over the coming years, Kelly will be

pivotal in delivering our key messages and securing new business,” said Chris Ann Ernst, the company’s vp. “He has represented Sleep Studio since its first year in operation and was a natural to fill this important position for us.”

Michelle most recently led product marketing and branding initiatives at Borghese, collaborating with product development, design, consumer insights and data analytics teams. Previous client work included private label and brand development among a wide range of mass

market, direct TV channels and department store clientele.

“Charly’s refreshing new approach to marketing will wake up a category that can become a little sleepy,” said Sleep Studio president Michael Rothbard.

“We are relying on her insight and skill as we launch several new campaigns and products this year.”

In addition to the new hires, Jennifer Kutsher Rosen has been retained as a public relations consultant for Sleep Studio. HTT

William-Sonoma’s Lester, 75 S A N F R A NC ISCO — Williams-

Sonoma chairman emeritus Howard Lester, who took a small local gourmet cookware store and built it into the biggest lifestyle home furnishings operation in the country, died last month at his home in Indian Wells, Calif., from cancer. He was 75.

Lester retired as ceo after a 32-year career this past May. “We are deeply saddened by the passing of Howard Lester,” said Laura Alber, who succeeded him. “Howard was a pioneer in retail and an incredible leader who served as a friend and mentor to many and he will be dearly missed.”

Williams-Sonoma founder and director emeritus, Chuck Williams described Lester as “a shopkeeper at heart. More importantly he has been my friend for over thirty years, and I will miss him.”

Lester became a retailer, but that’s not where his career started. Through the 1960s and early 1970s, he created several

of his own companies, primarily related to the computer and software business.

All that changed in 1978 when he met Williams, who was running a small chain of gourmet cookware stores in the San Francisco area. He bought into the business and immediately began to use his technical knowledge to build the company. Someone who interviewed him once said that Lester was the only ret ailer he ever met who used the word algorithm, and knew what it meant.

Williams-Sonoma stores soon began to appear in ever-growing numbers, followed by a direct business, first in print and later online. He took the company public in 1983 and during his tenure, Williams-Sonoma grew to more than 600 retail stores, seven direct mail catalogs and six online retail websites. He bought Pottery Barn from The Gap and eventually built the retail portfolio to include Wil-

liams-Sonoma Home, Pottery Barn, Pottery Barn Kids, PBteen and West Elm. He is survived by his wife Mary; his children: Kirk and his wife Sheryl; Kathryn Lindlan and her husband Tim; and Kristen Rio and her husband Steve; his five grandchildren: Claire, Charles, and Charlotte Lester, Luke and Sarah Lindlan and his niece, Elizabeth Lester Hartmann.

In lieu of flowers the family has asked that donations may be made to: MD Anderson Cancer Center: www.mdanderson.org/howyou-can-help/make-a-donation/ index.html UCSF Helen Diller Family Comprehensive Cancer Center: www.cancer.ucsf.edu/howtohelp/ Delancey Street Foundation: www.delanceystreetfoundation. org St. Jude Children’s Research Hospital: www.stjude.org/waystohelp. HTT

CHECK US OUT ON THE WEB

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Kohl’s Promotes Four Top Execs M E N O M O N E E FA L L S , W I S . —

Kohl’s has promoted four executives to new posts.

Don Brennan is the company’s new chief merchandising officer, John Worthington is now

chief administrative officer, Peggy Eskenasi has been named senior executive vp, and Wes McDonald is the new senior executive vp and cfo. All promotions were effective Dec. 1. HTT

Sorgeloos Named President-Elect at HFPA Meeting NEW YORK — The Home Fash- Revman International, who is ion Products Association HFPA president. Preheld its annual meeting sentations were given here recently, naming for various commitHome Source Internatees, including memtional president Keith bership, finance, legal Sorgeloos as presidentand philanthropic elect. He will take office activities. Membera year from now. ship for the group is The event, preceeded KEITH SORGELOOS up 10% to 53 memby a board of direcbers, one of the largest Home Source International tors meeting, was highincreases in a number lighted by a presentation of years. Membership

by Janine Finkle, vice presi- dues will not be raised in 2011. dent of market intelligence for Sorgeloos also heads the Design Research Reports, who YoPro committee for young spoke on demographic trends professionals, and he reported impacting home marketing on activities at the recent fall strategies. market, where some 170 stuSome 50 industry execu- dents toured New York showtives were at the event, pre- rooms and attended a seminar sided over by Rich Roman of with industry executives. HTT

Valley Forge Exec Receives ICON Award F T. L AUDERDALE , F LA . — Judy Dobin, principal and executive vp of Valley Forge Fabrics, received the Network of the Hospitality Industry’s ICON of the Industry Award recently at the New York Hotel/Motel and Restaurant show.

Dobin is the first woman honored by NEWH, who established the award six years ago.

The award honors hospitality industry manufacturers who have

made a significant impact on the industry through their innovation, have dedicated their companies to their communities and the industry through outreach, mentoring and education, and have a minimum of 30 years in the industry.

Dobin has run Valley Forge Fabrics for over 35 years and has been active in NEWH over the last 25 years. She is also active in several charitable organizations. HTT

12/2/2010 5:27:42 PM

NY Fall Home Fashions Market — September 2010

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Home Textiles Today

> hometextilestoday.com

December 6, 2010

BUSINESS TodaY November a Winning Month for Key Retailers

BY CECILE B. CORRAL N EW YORK — With the excep-

tion of Stein Mart, which posted flat comps for the period, November proved a solid month in same-store sales for all key retailers.

Heading the pack of 13 major chains tracked monthly

by HTT was Plano, Texas-based JCPenney with 9.2% in comp

buy for themselves,” added Mike Ullman, chairman and ceo.

Dillard’s strong results got no help from the home department, which along with furniture and cosmetics was “significantly below trend,” the company said.

Another newcomer to the comp-gain list was Abilene, Kan.-based Duckwall-Alco. The 214-unit regional discounter at-

10.0%

5.9%

8.5%

2010 year-over-year

7.0%

NOVEMBER SALES FOR KEY RETAILERS Four weeks ended November 27 a (dollar amounts in millions) a BJ’s Wholesale Club b The Bon-Ton Stores Inc. Costco Wholesale Corp. c d Dillard’s Inc. Duckwall-ALCO Stores Inc. Fred’s Inc. J. C. Penney Company Inc. Kohl’s Corp.

Macy’s Inc. Ross Stores Inc. Stein Mart Inc. Target Corp.

The TJX Companies Inc.

4.0%

1.0%

-3.5%

November Same-Store Sales Johnson Redbook Index

-5.0% NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV Source: Johnson Redbook Retail Sales Average, a unit of Instinet, a Reuters company.

increases. But equally noteworthy was the department store that took second place – Little Rock, Ark.-based Dillard’s, with an 8.0% gain, reversing its long streak of soft comp results.

JCP’s strong performance was sparked by its “biggest Black Friday sales event” in the 1,100plus unit chain’s history. Topselling items on Black Friday as well as Cyber Monday included fashion boots, the St. John’s Baybranded cashmere-blend pea coat, and Liz Claiborne sportswear for women, as well as St. John’s Bay polos and Stafford flannel sleep pants for men.

“Customers also chose to shop for holiday gift items through jcp.com, as traffic and conversion on the company’s ecommerce site were well-ahead of last year throughout the holiday weekend,” JCP noted.

“Customers are responding very well to our gift assortments as well as taking advantage of our great promotions in order to

htt101201_016 16

TOTAL % CHG.

SAME-STORE % CHG.

$900.1 $319.1 $6,780.0 $469.3 $43.5 $146.3 $1,845.0 $2,022.0 $2,344.0 $696.0 $107.6 $6,012.0 $2,000.0

$833.6 $310.8 $6,040.0 $437.9 $40.1 $138.1 $1,721.0 $1,870.0 $2,174.0 $635.0 $107.8 $5,689.0 $1,800.0

8.0 2.7 12.0 7.0 8.5 6.0 7.2 8.1 7.8 10.0 (0.2) 5.7 7.0

5.0 2.9 7.0 8.0 5.8 4.7 9.2 6.1 6.1 6.0 0.0 5.5 3.0

TOTAL % CHG.

SAME-STORE % CHG.

2010 SALES

2.5%

-2.0%

2009 SALES

43 WEEKS

5.5%

-0.5%

2010 SALES

WINNERS Same-store sales % change

WINNERS J.C.Penney Dillard’s Inc. Coscto Wholesale Corp.

Kohl’s Corp.

Macy’s Inc. Ross Stores Duckwall-ALCO

9.2% 8.0 7.0 6.1 6.1 6.0 5.8%

LOSER Stein Mart Inc.

(0.0)%

tributed 5.8% comp increase to the revamping effort in its stores and expanded assortments of consumables over the past several months.

“We are encouraged by the Alco stores’ 6.3% same-store sales increase in November, including a robust improvement for Thanksgiving week compared to 2009,” said Rich Wilson, president and ceo.

Domestics was among the strongest performing categories at Duckwall-Alco in November.

BJ’s Wholesale Club b The Bon-Ton Stores Inc. Costco Wholesale Corp. e Dillard’s Inc. Duckwall-ALCO Stores Inc. Fred’s Inc. J. C. Penney Company Inc. Kohl’s Corp.

Macy’s Inc. Ross Stores Inc. Stein Mart Inc. Target Corp.

The TJX Companies Inc.

$8,740.1 $2,289.6 $20,590.0 $4,574.9 $379.4 $1,506.0 $13,900.0 $14,374.0 $19,078.0 $6,417.0 $952.4 $51,522.0 $17,600.0

a. Reporting periods vary from chain to chain. b. Excluding gasoline, merchandise comparable club sales increased 3.8% for the four-week period. Year to date merchandise comparable club sales excluding gasoline increased 2.9%. c. Total sales results include sales fromthe company’s Mexico joint venture. d. Comp club results are for the U.S. division. Excluding the positive impacts of inflation in gasoline prices and strengthening foreign currencies, comparable club sales for the month were up 6% in

“November marks the second complete month of our new Alco store layouts and merchandise selections, plus the integration of our partnership with Associated Wholesale Grocers to offer the ‘Best Choice’ and ‘Always Save’ brands,” Wilson continued. “Our core customer is responding positively to Alco’s improved value proposition and customer experience.”

Even though it was the lowest comp gain on the key-retailer list for November, the 2.9% increase at York, Pa.-based The Bon-Ton Stores was a boon for the regional department store, which has been struggling with

2009 SALES

$8,049.7 $2,268.6 $18,570.0 $4,533.2 $386.2 $1,453.0 $13,727.0 $13,366.0 $17,814.0 $5,839.0 $985.1 $49,406.0 $16,200.0

8.6 0.9 11.0 1.0 1.8 4.0 1.3 7.5 7.1 10.0 (3.3) 4.3 9.0

4.8 1.2 4.0 2.0 3.2 2.4 2.5 4.7 4.9 6.0 (1.8) 2.4 4.0

the U.S. division, 8% in the international division, and 6% for the total company. e. Because it is on a different fiscal calendar than most of the other key retailers on this list, Costco’s year-to-date sales and comp results reflect the past 13-week period. Excluding the positive impact of inflation in gasoline and strengthening foreign currencies, comparable club sales were up 3% in the United States, 10% in the international division, and 5% for the total company year to date.

the soft economy lately.

Another plus for Bon-Ton: Home was one of the seven best performing categories.

“We are pleased with our sales performance in November, which included a recordbreaking Black Friday,” said Tony Buccina, vice chairman and president — merchandising. “We begin December wellpositioned for holiday selling with comparable store inventory up 3% and our aging of inventory much improved over last year.”

Tied for fourth place in November comps were M e n o m o n e e Fa l l s , W i s . -

based Kohl’s and Cincinnatibased Macy’s – both with 6.1% comps.

Encouraged by this, Macy’s said increased its guidance for sales and earnings in the fourth quarter of 2010. Same-store sales are now are expected to be up 3.5% to 4.5%, compared with previous guidance of up 3% to 4%. Earnings guidance now is $1.44 to $1.49 per share, compared with previous guidance of $1.42 to $1.47 per share. This would result in full-year 2010 earnings of $1.96 to $2.01 per share, excluding expenses associated with the early retirement of debt. HTT

12/2/2010 2:34:29 PM

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18

Home Textiles Today

December 6, 2010

Business

Walmart U.S. 3Q Sluggish, Hindered by Home and Apparel

BY CECILE B. CORRAL B ENTONVILLE , A RK . — Home was among the two lines of businesses — with apparel — that suffered negative comp store sales during the company’s third quarter at Walmart U.S., which overall experienced sluggish sales, store traffic and average ticket.

“Operating income grew faster than sales, and Bill [Simon, Walmart U.S. president and ceo] and his team delivered expense leverage,” noted Mike Duke, president and ceo of Wal-Mart Stores Inc., during the retailer’s prerecorded earnings call last month. “The U.S. team is taking the right steps to position our stores for the fourth quarter and for next year.”

Added Tom Schoewe, evp and cfo, in his last earnings call presentation before he retired from the company Dec. 1: “We have an opportunity to improve Walmart U.S. comp store sales.

We believe the fourth quarter will be in positive territory.”

Still, the company grew its profit for the quarter ended Oct. 31. Total income from continuing operations attributable to Walmart for the quarter was up 9.3% to $3.4 billion, or 95 cents per share.

Sales rose 2.6%, to $101.2 billion from $98.7 billion.

Ye a r t o d a t e , Wa l - M a r t Stores Inc.’s sales increased 3.8% to $303.35 billion from $292.31 billion, and income from continuing operations attributable to Walmart grew by 7.5% to $10.33 billion from $9.6 billion.

Simon said the overall home business was plagued by “some weakness in discretionary and décor categories, but customers responded well to back-to-college, cooking and dining merchandise as well as and floor care.”

Home performed better online at www.Walmart.com, and the company expects this trend to continue into the holiday season, “driven by strong site-

htt101201_018_020_021 18

to-store demand, free shipping to home, an expanded FedEx metro pickup, now in five major metropolitan markets and our ‘pick up today’ program, now available in over 800 stores.”

Home was a bright spot at Sam’s Club, where sales during the quarter were “particularly strong in fresh, jewelry, home and certain technology and entertainment categories,” said Brian Cornell, the division’s president and ceo.

The warehouse club chain’s third quarter net sales, excluding fuel, increased 138 basis points over last year to $11.1 billion. Including fuel, quarterly sales increased 2.7% to $12.1 billion.

Sam’s Club third-quarter comp sales, excluding fuel, increased by 2.4%, exceeding original guidance of flat to 2%.

Sam’s year-to-date sales, excluding fuel, were up 3.1% to $36.35 billion, and comps rose 1.4%.

Walmart U.S.’ net sales for the 13-week period were flat to last year at $62.2 billion, and its comp store sales were within guidance, declining 1.3% as both traffi c and average ticket fell slightly.

Inventory was another soft spot in the third quarter for Walmart U.S., with a 6.5% increase compared to last year.

This rise was driven primarily by the planned seasonal buildup in the distribution centers, Simon said, adding “We’ve also been staging merchandise for the holidays at our import [distribution centers]. In-store inventory was up approximately 3.0% in the third quarter compared to last year. We’ve managed our inventory well, even as we add to our assortment.”

This holiday, Walmart U.S. expects its core customers to be focused on price, basics, toys for kids and practical gifts, while also budgeting for new technology items like eReaders and gaming systems.

As was the case in the recent back-to-school and Halloween

seasons, “we expect that a lot of the spending will come close to Christmas,” Simon said. “We’re expecting Q4 to be another quarter of sequentially improving comp sales.”

Walmart U.S. expects positive comps for the 13-week fourth quarter period, from October 30 to January 28 – in the range of a negative -1.0% to a positive 2.0%. The division also plans to open: between 155 and 165 supercenters – of which 45 to 50 will be new units and the remainder conversions. Walmart is also planning on opening 30 to 40 medium- to small-format stores; and remodel more than 500 existing sites.

The more than 580 stores already remodeled in 2010, completed by the end of the third quarter, “have helped drive our highest ever customer experience scores and will deliver a great shopping experience this holiday season,” Simon said.

Turning to its earnings guidance, Schoewe said that based on the company’s expectations for the U.S. sales environment in the fourth quarter, Walmart is projecting diluted earnings per share from continuing operations attributable to Walmart to range from $1.29 to $1.33.

This compares to an adjusted $1.26 per share last year, which included a net benefit of approximately six cents per share related to certain tax matters and restructuring charges.

“Our updated fiscal year 2011 guidance of $4.08 to $4.12 earnings per share is an increase from the previous range of $3.95 to $4.05 per share,” he added. “The full-year increase in our EPS guidance reflects the tax benefit from the third quarter, and our expectations for solid underlying operational performance by our segments in the fourth quarter.”

The company noted this new full year guidance assumes that currency exchange rates remain at current levels. The adjusted EPS for fiscal year 2010 was $3.73, which included the same six cents benefit. HTT

Home Depot’s Small-Ticket Sales Make Gains in 3Q

BY CECILE B. CORRAL ATLANTA — Even though sales of small-ticket goods continued to outpace larger-ticket purchases, the third quarter at The Home Depot marked the fourth consecutive period of positive comps overall and the third quarter in a row for positive comps for the United States.

Chairman and ceo Frank Blake outlined some of Home Depot’s other quarterly highlights during the 1,976-unit chain’s earnings call last month.

At the crux is the “stabilizing” of the company’s overall business, particularly in the U.S. Home Depot also operates stores in Canada and Mexico.

“In the U.S., more than 80% of our top 40 markets positively comped,” he said. “Compared to prior quarters, the variability of performance has narrowed so that we see less dramatic swings on the positive and on the negative side…From an overall perspective, we see a stabilizing business.

And as the business stabilizes, we continue to improve our operational performance.”

Also, the third quarter was a period of improved inventory turns and continued growth in transac-

tions.

However, average ticket “continues to be a challenge just as the macro-housing environment remains under pressure.”

Home Depot’s third quarter net earnings grew by 21.0% to $834 million, or 51 cents per share. Sales totaled $16.6 billion, up 1.4%. Comps rose 1.4% for the company and 1.5% in the United States.

Year to date net earnings rose 18.6% to $2.751 billion, or $1.65 per share. Sales increased 2.4% to $52.87.

Comp transactions were up 2.2% in the quarter. But, “as expected,” Craig Menear, evp merchandising, continued, “we have not yet turned the corner on average ticket,” which was down 0.8%, or 43 cents, to $51.46.

He noted that smaller-ticket purchases were stronger in the quarter, while the big-ticket purchase remained under pressure.

Home Depot updated its fiscal 2010 guidance and now expects sales to be up approximately 2.2% for the year. The company also expects diluted earnings per share from continuing operations to increase by about 25% to $1.94 for the year. HTT

TJX’s Inventories to Get Leaner F R AMINGHAM , M ASS . — TJX Cos. attributed its strong profit performance to pared down inventories – which generated faster turns with better margins — and said it thinks it can go even leaner.

“As lean as we are, I still believe we have further opportunities to bring inventory down,” president and ceo Carol Meyrowitz told analysts during the company’s third quarter conference call last month. “We entered the fourth quarter with even leaner inventories and more open-tobuy than last year.”

TJX report net income up 14% -- on top of 40% growth in the year-ago quarter – to $372 million, or 92 cents per share. Although average ticket is still slightly down, sales rose 5% to $5.5 billion, with consolidated comps up 1%.

Meyrowitz also said TJX Cos. will pick up the pace next year on openings of Marmaxx nameplates and HomeGoods stores,

both of which had good third quarters.

Marmaxx comps rose 1%, on top of a year-ago 9% increase, with $3.5 billion in total sales for the division. Home Goods comps were up 3% against a 13% increase last year with a sales volume of $480 million. Comps at A.J. Wright fell 2% with $198 million in sales, primarily the result of unseasonably warm weather, she said.

Asked about the impact of higher cotton prices, Meyorwitz said they are a good thing.

“Average ticket going up is certainly a benefit to our comp and our average ticket,” she said.

Based on third quarter results, the company raised its guidance for the full year, projecting an jump in earnings per share of 17% to 19%.

The company did not raise its outlook on the fourth quarter, continuing to believe earnings will be flat to down 5%.HTT

12/2/2010 4:03:18 PM

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December 6, 2010

Business

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Target 3Q Sees Shoppers Adding “Indulgences” to cart Along with Groceries

BY CECILE B. CORRAL M INNEAPOLIS — Target’s consumers remained cautious about spending in the third quarter, but the discount chain still managed double-digit gains in earnings and more modest increases in sales and comps as shoppers engaged in “occasional indulgences.”

During Target Corp.’s quarterly earnings call last month, evp of merchandising Kathryn Tesija explained the evolving trend.

“Guests continue to be very deliberate in their shopping behavior,” she said, later adding, “The recession taught them to create and live within budget,

and even as the economy improves, they continue to shop with a list. More recently, our guests have started to put an occasional indulgence on that list.

In those cases, they’re willing to wait and save for the right item rather than settling for a substitute item at a lower price point.

To feel good about these occasional indulgences, guests focus intently on price and value in their everyday purchases.”

This, coupled with several other initiatives like the emphasis on food and consumables in remodeled stores, helped drive Target Corp.’s third quarter results.

The 1,752-unit chain saw net earnings increase 22.6% to $535

million in the third quarter, which ended October 30. Earnings per share were up 28.5% to 74 cents from 58 cents.

Sales rose 3.0% to $15.2 billion from $14.8 billion in 2009, due to a 1.6% increase in comparable-store sales combined with the contribution from new stores. Traffic was up over 2.0%.

Year to date, results included: a 21.4% increase in net earnings to $1.885 billion from $1.552 billion; a 4.1% rise in sales to $45.5 billion from $43.7 billion; and a comp gain of 2.0%.

By product category, Target said in the third quarter it “continued to gain market share in categories throughout the store, with

Lowe’s 3Q Below Expectations But Encouraging

BY CECILE B. CORRAL MOORESVILLE, N.C. — As shoppers remain cautious about spending on major home improvement projects, Lowe’s Companies Inc. experienced below-expectations third quarter results but saw gains in lowerpriced, smaller-project products in 10 of the company’s 20 major categories.

During the earnings call last month of the 1,734 unit home improvement chain, which operates stores in the United States, Canada and Mexico, Nick Canter, evp, merchandising, said Lowe’s grew its share “noticeably” in half of its categories, especially in small projects-related areas like tools, paint, and lawn & landscape, specifically, as well as in larger ticket items like appliances.

The retailer is pursuing further growth in these segments by enhancing its value message with other incentives for shoppers.

“Value is more than just an everyday competitive price,” Canter said. “[It’s about] low price plus innovation or low price plus compelling style or low price plus unmatched service.”

One way Lowe’s is building on the “value plus style” effort is with its “allen + roth” brand of home décor products, which on

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the soft side includes soft window treatments and area rugs.

“This line offers customers the ability to coordinate across many product categories, including window treatments, paint, lighting, bath vanities and accessories, closet organization and more,” Canter continued.

“The brand offers classic style with modern flair and provides our customers with a specialty store look that fits both their style and their budget.”

Results for the third quarter, ended Oct. 29 included: a 17.4% increase in earnings to $404 million and a 26.1% rise in earnings per share to 29 cents.

Sales rose 1.9% increase to $11.6 billion, comps up 0.2%.

“Although sales in the quarter trended below our guidance, our merchandising strategies helped us deliver 85 basis points of gross margin expansion in the quarter,” said Robert Niblock, chairman and ceo. “Comp traffic and comp average ticket were also positive for the quarter..”

Still, Niblock added, results for the quarter were lackluster, “impacted by the continued sluggishness of the economic recovery, driven by the ongoing uncertainty in unemployment and housing. As we’ve seen over the past several quarters, consumers are not yet willing to consis-

tently take on larger, discretionary home improvement projects.

They remain cautious and continue to rationalize the scope of their projects, or in many cases delay projects until they have better clarity about their personal financial situations, the value of their homes, and the overall macro-economic outlook.”

For the nine-month period net earnings increased 9.3% to $1.72 billion; earnings per share grew by 13.1% to $1.21; sales rose 3.5% to $38.3 billion; and comps were up 1.4%.

Private brands contributed to the quarter’s improved gross margins, Canter said. For that reason, the chain is expanding its private brands going forward.

“We’ll always be a house predominantly of national brands.

But over the next few years we expect to further increase our penetration of private branded products from approximately 15% to 18%,” Canter said.

Lowe’s fourth-quarter outlook calls for: the opening of about 17 stores; a 2% to 4% increase in total sales; a 0% to 2% gain in comps; an approximate 80 basis point increase in earnings before interest and taxes as a percentage of sales; and diluted earnings per share of 16 to 19 cents. HTT

meaningful gains in beauty, baby, apparel, toys, healthcare and, of course, grocery,” Tesija noted, adding that grocery is growing at a double-digit pace, particularly in remodeled stores.

Home was not among the highlights for the quarter, but it did generate positive sales, driven by seasonal back-to-school and back-to-college product offerings, she added.

To accommodate the steppedup food assortment at remodeled stores, other departments such as home were edited and given a new presentation.

In 2011, the retailer expects to “set new record” by remodeling 380 additional existing sites and add about 400 additional

new locations to the total store count that incorporate the new design, layout, and presentation, said Gregg Steinhafel, chairman, president and ceo.

By comparison, Target in the third quarter opened 10 new stores, completing its 2010 new store program, and completed more than 100 remodels for a total of 341 for year.

To date, Target is operating 462 general merchandise stores that incorporate the expanded food “as well as hundreds of sited with our expanded and updated design in several departments,” including home, he said. HTT

BJ’s Updates Guidance for 2010 after Strong 3Q NATICK , M ASS. — BJ’s Wholesale Club Inc. recently offered its updated guidance for fiscal 2010 after a favorable third quarter.

Net income for the third quarter, ended Oct.30, shot up by 32% to $23.0 million, or 43 cents per share. Results included a pre-tax charge of $11.7 million ($6.9 million post-tax) in connection with the settlement of a legal claim relating to wage and hour job classification claims.

The 190-club chain also reported a 4.8% increase in sales to $2.57 billion. Comparable club sales increased 2.5%, excluding the impact of gasoline sales, and merchandise comps grew 1.5%.

Traffic in the quarter grew by 2.4%, but average ticket decreased by about 1%.

“The food and perishable categories remained strong but general merchandise and non-edible consumables were weaker than planned [in the third quarter],” explained Frank Forward, evp, cfo, during BJ’s earnings call. “Comps increased by 4% and general merchandise sales decreased by 3%.”

“Within general merchandise, we had soft sales in apparel, affected by a warm fall in the Northeast, and sales of televisions remained weak with a comp decrease of about 9%,” he continued. “Additionally, non-edible consumables were affected by

deflation and trading down.”

For the first nine months of 2010, net income grew 10.5% to $84.8 million, or $1.58 per diluted share. Sales rose 8.6% to $7.84 billion. Comparable club sales saw a 4.8% increase, excluding the impact of gasoline sales, and merchandise comps increased 2.8% year to date.

Encouraged by its third-quarter results, BJ’s revised its earnings guidance for fiscal 2010, which ends Jan. 29. The company now expects net income in the range of $133.6 million to $135.6 million and earnings per share in the range of $2.48 to $2.52. By comparison, BJ’s previously expected net income in the range of $128.5 million to $134.5 million and diluted earnings per share in the range of $2.40 to $2.50.

However, BJ’s withheld guidance for 2011.

“Given the difficult economic environment that we expect to face in the fourth quarter, we think it is prudent to get through Q4 before providing guidance for 2011,” Forward said. “We do expect to see some gradual improvements next year. And our membership fee will increase $5 starting in January.”

The company expects to provide detailed guidance for next year in early March. HTT

12/2/2010 4:00:10 PM

Business

> hometextilestoday.com

NRF: October Fourth Consecutive Month of Retail Sales Gains WASHINGTON — Retailers “have reason for optimism” this coming holiday season, noted the National Retail Federation, as October sales marked the fourth straight month of gains, suggesting consumer spending is “finally showing momentum.”

October retail industry sales – which exclude automobiles, gas stations, and restaurants – increased 0.3% seasonally adjusted over September and 2.6% unadjusted over last year, the NRF reported.

“This continued momentum is good news for the industry, especially with Black Friday and Cyber Monday quickly approaching,” said Matthew Shay, president and ceo of NRF. “While there is no question that consumer demand has improved, there are still questions about consumer confidence tied to high unemployment. We need to see improvement in key economic indicators to sustain any long-term growth.”

The U.S. Commerce Department reports that October sales,

which it released last month, show total retail sales – which include non-general merchandise categories such as autos, gasoline stations and restaurants – increased 1.2% seasonally adjusted over September and 5.4% unadjusted year-over-year.

“While spending throughout the industry was varied, it appears the fourth quarter has gotten off to a solid start,” added Jack Kleinhenz, NRF chief economist.

“October’s results are a clear indicator that the economy and consumer spending continue to show marked improvement, even though we expect consumers to proceed with caution.”

Cooler, more seasonal weather in October helped apparel and sporting goods stores’ sales, as clothing and clothing accessory stores sales increased 0.7% seasonally adjusted over last month and 1.4% unadjusted over last year. Sales at sporting goods, hobby, book and music stores increased 1.0% seasonally adjusted month-to-month and 5.9% unadjusted year-over-year. HTT

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Home Textiles Today

December 6, 2010

Same-store sales

Thanksgiving Week Recorded Strong Comps N EW YORK — In the strongest showing in several of outerwear, gloves, boots and cashmere sweaters,” years, same-store sales jumped 4.9% for the week end- said Catlin Levis, Redbook analyst.

Sales a luxury stores also rebounded nicely comed Nov. 27, according to the Johnson Redbook.

This time, department stores lead the way, with pared to last year, she said.

Redbook’s preliminary target for December comps comps up 5.7%. Same-store sales in the discounter segment rose 4.5%, according to the Johnson Redbook Re- is a 3.2% gain. HTT tail Sales Index.

That helped push comps above Johnson Redbook Index the November target of 2.9% to Fourth week of November, year-over-year % change 3.2%.

WEEK ENDED 11/6 11/13 11/20 11/27 MONTH TARGET “The holiday shopping season Department stores* 1.6 1.9 1.0 5.7 2.5 2.0 had gotten off to a strong start Discounters 3.1 3.2 3.4 4.5 3.5 3.3 with brisk traffic and cooperative Redbook Index 2.6 2.7 2.5 4.9 3.2 3.9 shopping weather. Retailers report*Including chain stores and traditional department stores ed strong turnover in electronics.

Source: Johnson Redbook Index The cold weather also drove sales

Consumer Confidence Hits Five-month High NEW YORK — While consumers don’t exactly think things are great right now, they do anticipate improvement, helping to drive up the Consumer Confidence Index to 54.1 in November from 49.9 in October.

The Present Situation Index rose to 24.0 from 23.5. The Expectations Index increased to 74.2 from 67.5 last month.

“Expectations, the main driver of this month’s increase in confidence, are now at the highest level since May (Exp. Index, 84.6).

Hopefully, the improvement in consumers’ mood will continue in the months ahead,” said Lynn Franco, director of The Conference Board Consumer Research Center, which conducts the survey.

A majority, 43.6%, describe current business conditions as “bad.” Consumers who see conditions as “good” fell to 8.1% from 8.3% last month.

But survey respondents are expecting things to get better. Consumers who believe conditions will improve over the next six months rose to 16.7% from 15.8% last month. HTT

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22

Home Textiles Today

December 6, 2010

OPINIONTodaY The Fabric of Our Lives – And It Isn’t Just Cotton “Nearly every product category report in 2010 has featured higher raw material costs as its theme.”

A

F T ER A LONG, LONG, LONG pitch in the dustry. I raised the subject of cotton increases and their imdirection of deflation, the pendulum swings pact on the industry. He poo-pooed the whole business.

So now, he said, it’s rising demand in China and back.

A headline from last week’s Investor’s Busi- India. Before, it was a flood in Louisiana or a drought ness Daily on the subject of cotton and labor cost increas- in Texas. Cotton prices go up; they go down. Nothing es: “Consumer price hikes on clothing to return after a new about it.

Retailers’ public stance on all of this has ranged from 22-year absence.” the disingenuous – usually some variant of Yes, Virginia, there is such a thing as infla“We’re working with our suppliers to shield our tion, although we haven’t seen it in the soft customers from price increases” to the laughable. goods industry in many a long day.

For the latter, check out Kohl’s “we’re going to Suppliers and manufacturers have been grappling with this for over a year. And HTT has EDITOR-IN-CHIEF solve the problem with more reverse auctions” spiel on page 4. been reporting on it apace. Nearly every prodWhat they’re not telling analysts about are uct category report in 2010 has featured higher the weeks during which China refused to even raw material costs as its theme. quote an order, much less take one – not to menHere’s the litany of rising costs over the past tion the incidents of manufacturers flatly refusyear: cotton, down & feathers, polyester, labor, ing to ship existing orders at their originally bid shipping. pricing.

The giddy bacchanal of easy credit and don’tIt’s been a long time since manufacturers sat ask-don’t-tell mortgage qualifications hit the wall a while ago. And now the offshoring-fueled downward spi- in the driver’s seat, and for younger retail buyers it will ral of soft goods prices has washed up on the wrong side of come as a revelation that prices sometimes go up. Seasoned vets, however, should not be incredulous. the supply/demand equation. Party’s over, folks.

To quote a line in the musical “Evita” – “The day you About a year ago, I was talking with an industry stalwart, a visionary during the high-flying days of the domestic in- knew would arrive is here. You’ll survive.”HTT

Jennifer Marks

A Global Crisis “Everyone in home textiles needs to stay aware that the exercises we’re going through are global and far beyond this industry’s effort to correct them.”

A

S THE GLOBA L SCENA R IO for product sup- suppliers. ply reaches almost crisis proportion in the home Then, of course, is the issue that many don’t accept. textiles world, it’s time to stop the tearing of han- Home textiles is merely a pimple on the ass of the elephant kies and the woe is me outlook. We all are in this in this crisis. But few in this business want to — or will acmess together — for one reason or another — and I’m not cept that we are far down on the economic totem pole of about to expound on my views in that arena textile manufacturing around the world.

At the same time, the entire consumer marIn terms of pricing for these major events, ketplace is bursting with price promotions across price points dropped to all-time lows. A JCPenthe product spectrum initiated in great measure ney towel was a typical offer at $3.99. But with FOUNDING this, as with its competitors similar — but not by the frenzy over the recent Black Friday, Cyber EDITOR-IN-CHIEF quite low ball pricing — there was no identifiMonday etc., etc. promotional events. cation of what the consumer would be getting As the price frenzy escalates, we’re hearing in terms of quality or size. more and more about retailers’ orders being accepted on And in one of the more spectacular comparison promothis side of the water and rejected almost immediately tions, Penney did a three-question ad concerning its new across the ocean. Net result — new pricing negotiations Liz Claiborne exclusive clothes actually citing Macy’s as a here, often with negative results. place where the collection could not be obtained. A comWhen one analyzes the pricing just in home textiles — petitive salvo few have ever seen. forget about the rest of the consumer products arena — This is the time frame when everyone in home textiles that showed up for the critical Thanksgiving week events, needs to stay aware that the exercises we’re going through one wonders how these were arrived at — and what fuare global and far beyond this industry’s effort to correct ture penalties would be forthcoming since the retailers certainly will have some “pay back” with their off-shore them. HTT

Carole Sloan

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360 Park Avenue South, New York, N.Y. 10010 Tel: (646) 805-0227; Fax: (646) 365-2307 www.hometextilestoday.com EDITOR-IN-CHIEF Jennifer Marks 375 South End Avenue #32U New York, N.Y. 10280 (212) 945-9151 | jnegley@hometextilestoday.com FOUNDING EDITOR-IN-CHIEF Carole Sloan 16 E. 96th St., New York, NY 10128 Tel: (212) 831-8266 | Fax: (212) 831-0814 PRODUCT EDITOR Cecile B. Corral 428 Bianca Ave. Coral Gables, FL 33146 (305) 661-7493 | cbcorral@aol.com COPY EDITOR Julie Murphy (646) 805-0224 | jmurphy@hometextilestoday.com DIRECTOR OF MARKET RESEARCH Dana French (336) 605-1091 | dfrench@sandowmedia.com PUBLISHER/EDITORIAL DIRECTOR Warren Shoulberg (646) 805-0226 | wshoulberg@hometextilestoday.com ASSOCIATE PUBLISHER Jeff Reeves (336) 605-1009 | jreeves@hometextilestoday.com ACCOUNT MANAGER NORTHEAST/MIDWEST/CANADA Mary McLoughlin (646) 805-0227 | mmcloughlin@hometextilestoday.com CLASSIFIED AD SALES Spencer Whittle (336) 605-1027 swhittle@sandowmedia.com Karen Hancock (336) 605-1047 khancock@sandowmedia.com MANAGER, CHINA Nancy Yu Tel: 86 (0) 21 5126 0111; Fax: 86 (0) 21 6539 0321 nancy@oceaniamedia.net MANAGER, EUROPE Mirek Kraczkowski Tel: 48 22 401 70 01; Fax: 48 22 401 70 16 | kraczko@aol.com MANAGER, INDIA Kaushal Shah Cell: 91-9821715431; Tel: 91-22-6663 4597 / 24988658 Fax: 91-22-66634596 | kj_reeds@yahoo.co.in ONLINE SALES MANAGER Penny Schneck (336) 605-1084 | pschneck@sandowmedia.com PRODUCTION MANAGER Rich Lamb Tel: (336) 605-1074; Fax: (336) 605-1143 | rlamb@ sandowmedia.com MANAGER, CLIENT SERVICES, WEB ADVERTISING Dan Sage | (336) 605-1080 | dsage@sandowmedia.com E-MEDIA PROJECT MANAGER Missy Axe | (336) 605-1005 | maxe@sandowmedia.com DIRECTOR OF AUDIENCE MARKETING Allison Ternes (704) 573-9007 | aternes@sandowmedia.com VP, PUBLISHING DIRECTOR Kevin Castellani (336) 605-1034 | kcastellani@sandowmedia.com

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December 6, 2010

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Cotton Pickings “The home textiles industry finds itself in the middle of yet another Cotton Crisis.”

T

’ WA S T HE MOR N I NG after Christmas and all through the store, the only creature stirPUBLISHER/ ring was the guy with the pricEDITORIAL DIRECTOR ing gun, putting higher tags on the sheets and towels.

The home textiles industry finds itself in the middle of yet another Cotton Crisis, an ongoing drama that seems to pop up on a semi-irregular basis.

This particular crisis is not to be confused with any of the other maladies that seem to inflict the industry from time to time, including, but not limited to: The Margin Crisis, the Chargeback Crisis, the China Crisis and, of course, the Crisis Crisis.

Now, this is not to say the situation with cotton is not serious.

It most certainly is. The wild swings in cotton prices — which are triggering sympathy increases in polyester — are very real and they are wrecking very real havoc with product prices.

So, perhaps a little context and perspective might help in understanding what’s going on.

• Cotton doesn’t grow on trees, but it does grow and like any agricultural product, it is subject to both natural and man-made variables. Floods in Pakistan are part of the former, agri-business decisions to reduce the acreage for cotton is part of the latter.

Cotton has been going up and down in price since the Garden of Eden. It’s what cotton does.

• Cotton costs twice as much as it did a year ago, maybe even higher depending on when you read this. But, when adjusted for inflation, it’s half the price it was during some stretches of the 1980s and 1990s. Everything is relative.

What is different this time is the violent changes in prices, often happening on a daily basis. This we haven’t seen before and that’s what makes this Cotton Crisis more severe than others in the past.

• Some suppliers and retailers have decided that polyester is the answer to the Cotton Crisis. More polyester, more blends, less cotton. This is a questionable solution for many reasons, not the least of which is that polyester pricing has been almost as screwy as cotton.

More importantly, the home textiles industry has spent the past 25 years telling its customers how wonderful all cotton products were. Now it has to say, wait, never mind, what you really want is a blend. It remains to be seen whether that’s going to go over all that well.

• An unexpected consequence of this entire thing may be that the buying process — which has turned into a marathon nightmare of meetings, samplings, more meetings, style-outs and yet more meetings — may finally return to something resembling timeliness. With only short-term commitments being given by suppliers on prices, buyers may actually have to pull the trigger in a timely fashion again.

For an industry that claims speed to market is a key criteria, speed of ordering has been a joke. Maybe it will change now.

• In case you needed yet more confirmation, China is now firmly in control of the home textiles industry. American marketing companies and retailers may think they are running the show, but that’s just an illusion.

• One last thing: This too shall pass. Eventually the growers will plant more cotton, someone will blink in the supply chain process and prices will start to moderate…until it happens all over again.

It’s just something you’re going to have to cotton to. HTT

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Warren Shoulberg

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Home Textiles Today

Pier 1 Imports Sees Double Digit Sales Gains in 3Q F ORT W ORTH , TEX AS — Pier 1 Imports Inc. reported double-digit increases in both total sales and comparable store sales for the third quarter.

Exceeding the home furnishings chain’s expectations, sales rose in 13.7% to $354 million versus $327 million last year, and comps jumped 10.2% in the period, ended Nov. 27.

Year-to-date comps increased

11.8% compared to a 0.6% decline in the year-ago first nine months.

Pier 1’s merchandise margins “remained strong in the third quarter” and are expected to be about 58.5% of sales compared to last year’s third quarter merchandise margins of 56.6% of sales.

“Our September and October sales results were strong and that momentum carried

throughout November and the Thanksgiving holiday weekend,” explained Alex Smith, president and ceo. “Traffic, conversion and average ticket for the quarter were positive and continue to be the key drivers of our comp store sales increases.”

Pier 1 will announce its full fiscal 2011 third-quarter earnings prior to market open on Dec. 16. HTT

Gordmans Raises 4Q Projections

BY CECILE B. CORRAL OMAHA , NEB. — Less than four months after its initial public offering, Midwest regional chain Gordmans generated aboveplanned operating results, driven by better-than-expected comp store sales, in its third quarter.

During the company’s thirdquarter earnings call Thursday evening, president and ceo Jeff Gordman attributed the quarter’s strength in part to “recent progress” on several key initiatives the 68-unit home décor and apparel retailer has recently adopted, such as an enhanced merchandise selection, refined inventory optimization strategies, and expanded geographic footprint.

With regards to the home department’s performance in the quarter, he singled out kitchen trends, wall accents, decorative lighting and decorative pillows as “some of the key drivers of our home décor business.”

He added that “several trends have been driving the business,” with contemporary and transi-

TexStyle TEXSTYLE FROM PAGE 2

product by product, is critical, Wang emphasized. TexStyle has always had an in-house design group, “but now I’m looking for free-lance designers” both here and in Europe. In terms of design, Wang considers European design ahead of American in terms of design, color and fabric – elements she hopes to translate to product development here.

tional themes “important across all home décor categories.” Also, color and embellishment “are important across all of our major businesses.”

For the third quarter, ended Oct. 30, net loss decreased to $2.5 million or 13 cents per share compared to $3.9 million or 24 cents per share, in the prior year.

Excluding the one-time, pre-tax charges of $10.6 million related to the initial public offering, the non-GAAP adjusted net income grew by 10.7% to $4.3 million, or 22 cents per share.

Sales rose 11.0% to $123.6 million, with comps up 6.0%.

Year to date, net income fell 27% to $7.2 million or 42 cents per share from $9.7 million or 61 cents per share. Excluding pretax charges of $11.8 related to the IPO, non-GAAP adjusted net income for the first nine months increased 51.8% to $14.7 million.

Sales for the 39-week period increased 14.9% to $348.6 million from $303.5 million, and comparable store sales increased by 9.7%.

“We are optimistic about our prospects for the holiday selling season as well as our ability to scale the business over the long term,” he added. “We have revised our guidance for the fourth quarter due to our strong performance in November.”

Even though it finds itself “up against “a very strong” 15% comparable store sales performance for December 2009, Gordmans now expects for the fourth quarter ending Jan. 29, 2011 sales to be between $160 million and $165 million, with a mid-single digit comparable store sales increase. Previously, the company projected sales between $155 million and $160 million, with a comp increase in the low single digits.

Also, Gordmans now projects net income in the range of $7.2 million to $8.1 million for the fourth quarter, which translates into earnings per share in the range of 37 to 42 cents, up from its previous expectation for net income in the range of $5.9 million to $6.8 million. HTT

Her major efforts this year will be focusing on bringing everything to “our base here that will make us more efficient than having three places as well as cutting costs.”

As far as people are concerned the three senior executives remain in place: Ken Hedrick, ceo; Guyer McCracken, coo/cfo; and Dan Cacella, executive vp.

“But I want to change from the old company to a new company with high tech approaches

and a quality of people with an international background.”

Over the long term, Wang plans to expand the company’s product mix here from window coverings, shower curtains, and slipcovers, juvenile bedding to decorative pillows, mattress covers and table linens. The company also produces and markets furniture, mostly high quality and design product for the outdoor market in Europe and China – a business she hopes to bring here as well. HTT

12/2/2010 5:06:04 PM

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1/4/2010 5:48:42 PM