Sales Down, Orders Short

he downward-spiraling economic conditions continued to negatively impact spinners in
early March. Orders were down for some spinners by 30 percent or more – and what business is coming
in is significantly shorter than usual.

“We’re still kicking, but everybody wants something cheap. We’re trying to run a full
schedule, but we stood for about a week’s equivalent last month,” said one Georgia spinner. “We’re
running okay right now, but it’s still to be determined how the rest of the month will go. All the
business is very short. Our customers are ordering just what they absolutely have to have and
nothing more.”

Said another spinner: “The pipeline is terrible and all of our orders are small. Our
customers call us and they want their product right now. We’re running all kinds of products just
to stay afloat.”

One North Carolina spinner reported similar business conditions.”Business isn’t what it was,
I can tell you that. We’ve had a rude awakening since about November,” he said. “We’ve had
significantly less forward business written, and we’ve had some major credit issues. Our customers
haven’t been able to pay us, which has put a tremendous amount of pressure on our cash flow. It’s
been a double whammy to have to manage curtailment and cash flow at the same time.”

“We’re running about 75 percent of the volume we had at the same time last year,” said
another Carolinas spinner. “We haven’t had to have any stoppages or furloughs, but we have
downsized. We’ve used a number of temporary employees in the past, and we’ve stopped using that

Part of the current difficulty can be attributed to waning product development by major
brands. “Normally, we would be seeing requests for new products as retailers look to refresh their
summer lines,” said one spinner. “The majority of our product development comes from the customer,
or the brand through the customer. I think you are seeing retailers becoming entrenched a little
bit as they wait for the economy to improve, so there is not a lot of development being initiated
at the brand level.”

Downward Pricing Pressures

Not only are orders in the tank for many spinners, but it also is becoming necessary to make
price concessions in order to move product.

“Our customers right now are taking a pretty hard line. They know if they can’t get it from
us at the price they want, they can probably get it somewhere else. So, we’ve had to do some hard
negotiating,” one spinner explained. “Some of our customers see the downward curve in cotton and
think the effect on yarn pricing should be immediate. But it doesn’t work that way.”

Another spinner agreed. “We are coming under more and more pressure to come down some. It’s
definitely a buyer’s market right now. Customers can pretty much dictate price up to a point,” he

A Glimmer Of Hope?

Of interest to many spinners – and a source for limited optimism – was the announcement in
early March by big-box retailer Wal-Mart that same-store sales in February soared 5.1 percent, more
than double analysts’ predictions. Overall, in the retail segment, while sales continued to slump
in February, the decreases were not as deep as initial forecasts had indicated.

“The fact that Wal-Mart is showing some signs of improvement is encouraging,” said one
spinner. “But, I imagine a lot of that increase is in perishables – food items and such – and not
consumer goods. But, just the fact that people were spending a little more money in February gives
us hope that, once the weather improves and consumers start shopping for spring and summer
fashions, some movement will take place.”

Overall, spinners who originally were hoping for significant improvement by June are now
hoping there will be a significant uptick by the end of the third quarter.

“Judging by what I am reading and seeing on the news, it could be at least that long before
business improves,” said one spinner. “I just hope a lot of us are still around to see it.”

March/April 2009