Home    Resource Store    Past Issues    Buyers' Guide    Career Center    Subscriptions    Advertising    E-Newsletter    Contact

More Business & Financial

Profits Edge Higher
October 13, 2015

Fiber Costs Move Lower
August 18, 2015

More Thoughts On Imports
June 16, 2015

Healthy Bottom Lines
April 14, 2015

2015 Off To A Fast Start
February 17, 2015

Textile World Photo Galleries
November/December 2015 November/December 2015

View Issue  |

Subscribe Now  |


From Farm To Fabric: The Many Faces Of Cotton - The 74th Plenary Meeting of the International Cotton Advisory Committee (ICAC)
12/06/2015 - 12/11/2015

Capstone Course On Nonwoven Product Development
12/07/2015 - 12/11/2015

2nd Morocco International Home Textiles & Homewares Fair
03/16/2016 - 03/19/2016

- more events -

- submit your event -

Printer Friendly
Full Site
Business & Financial

Weaker 2011 Profits

Robert S. Reichard, Economics Editor

With a good part of the year gone, all signs are now pointing to a sizable 2011 earnings decline for our cost- and import-challenged textile mills. To be sure, financial data from Uncle Sam's Census Bureau — available only through midyear — don't look all that bad. But this will be changing when third- and fourth-quarter data come out. It's hard to see otherwise - primarily because earnings are being dragged down by the spate of recent increases in the costs of cotton, other fibers, transportation, chemicals and dyes. And things are pretty much the same when it comes to margins — profits per dollar of sales and profits per dollar of stockholder equity. Equally significant, similar slippages are expected for domestic apparel makers. Indeed, some modest early 2011 declines, both in terms of dollar profits and margins, have already been reported by many big apparel manufacturers. But there's no need to panic. For one, all of the anticipated textile and apparel profit numbers look to remain solidly in the black. That's in marked contrast to what happened during the big 2008-09 business recession, when some of these firms actually slipped into the loss column for a few quarters. Also on a rosier note, both textile and apparel companies are expected to begin recouping some of these new slippages by sometime next year, mostly because cotton, the major fiber input, should be stabilizing at around $1 per pound — far below its recent sky-high $2-plus-per-pound levels.


Some Specific Numbers
One hint as to where current and future profit levels will settle comes from the latest quarterly forecast from Global Insight, one of the nation's most prestigious economic consulting firms. Looking at the current year, the firm's analysts see a sizeable drop. Using their own approximate measure of industry earnings — shipments less raw material and labor costs — they see earnings for mills making basic textiles declining by an impressive 43 percent this year. That more than wipes out last year's big 38-percent comparable increase. And the profit slippages for both more highly fabricated mill products and apparel are projected to be even larger. But, as pointed out earlier, next year could mark the beginning of a turnaround. Global Insight's 2012 projections again tell the story. Profits in all three subgroups of the textile/apparel industry complex are expected to bottom out next year, though in no case will they come near to recouping 2011's expected declines. On the other hand, much bigger improvements are seen for 2013, when earnings in all subgroups should again be topping 2010's levels. One key factor behind these bullish earnings expectations: A continuing decline in raw material costs — costs which, at last report, accounted for anywhere from 60 to 70 percent of the textile/apparel shipment dollar.

Other Upbeat Signs
A better handle on costs, however, isn't the only reason for profit optimism over the longer pull. For one, a slowly improving economy will clearly play a role in shoring up domestic mill and apparel-maker bottom lines. So will an already apparent leveling off in imports. Looking at the economy first, all the current scare talk about a double-dip recession seems overdone. Encouraging factors that are often overlooked by purveyors of gloom and doom would have to include a reduced consumer debt load; a significant recovery in U.S. net worth vis à vis the recent recession low; continuing low interest rates; the huge amount of cash U.S. firms are sitting on; and new government stimulus moves. Given all of the above, it's not surprising that most recent surveys of top economists point to a still-positive 2-percent growth rate over the next year or two. Then there's the brightening import picture. Don't underestimate the fact that incoming shipments of textile and apparel on a square-meters-equivalent basis are now pretty much unchanged from year-ago levels. It marks a major shift from the double-digit increases of a few years ago. Moreover, when it comes to China, by far the United States' biggest overseas supplier, the year-to-year numbers are fractionally lower. And they're likely to remain so, as internal inflation and a slowly rising currency combine to make that nation's textile and apparel products a bit less competitive. In any event, Textile World now sees very little growth in overall textile imports over the next few years — something that, in turn, could help direct most of any future growth in U.S. consumption toward domestic suppliers.

Related Files:
Click here to view Textile Barometers