A Final Look At 2002

he year is ending on a somewhat uncertain note. First and foremost, there’s the volatile
Near East situation — one that in the months ahead could well affect the entire business curve and,
hence, the textile outlook.

Equally important is the outlook for holiday sales. Apparel and homefurnishings are moving
tolerably well, but only with promotions and some outright price slashing.

Textile World
is cautiously optimistic that these markdowns will be effective — aided by such factors as
lower interest rates, a new rash of mortgage refinancings, and rising incomes. These same forces
were operative last year at this time — and they worked. There’s little to suggest they won’t

Upshot: This season’s apparel and homefurnishings sales, while they won’t be spectacular,
should manage to rack up a modest 3- to 4-percent overall gain.

Prices Remain A Problem

The raising of textile quotes, however, is another story. The big apparel markdowns alluded
to clearly will strengthen garment-maker and retailer resolve to resist the posting of any new
fabric increases on the part of the mills. So will today’s deflationary price climate — one in
which overall US producer prices continue to lag behind year-ago averages.

Cheap imports — which are again coming in at a near-double-digit clip — are proving to be
still another price-boosting inhibitor. Ditto, domestic mill overcapacity — as mill operating rates
struggle to remain over the relatively low mid-70s range.

Finally, there’s the cost side of the price equation. Mill profits could certainly use some
beefing up, but there’s little to suggest any crisis in their labor and fiber costs that would
precipitate any big new cost-price passthroughs.

Price Indices Tell The Story

The combined impact of all the price determinants noted is taking its toll. It helps explain
today’s virtually flat patterns in almost every textile area — with only the carpet and rug sector
(up 2 percent over the past year) managing to eke out a meaningful advance.

Proof positive of all this easiness comes from TW’s bellwether, all-inclusive Textile Mill
Products Price Index. Latest readings show little more than a miniscule 0.5-percent price advance
since February. And if you zero in on key greige goods and finished fabric price averages, you find
both sectors down 1 to 2 percent from a year ago.

Moreover, given all of today’s domestic and international uncertainties, these key price
yardsticks are highly unlikely to post any meaningful increases — at least not over the next few

Fiber Tags Are Sluggish, Too

There’s also been little overall upward movement in fiber prices. True, there have been some
small increases and decreases, but for the most part they’ve balanced each other out.

On the upside, cotton has moved from the low 30s range of last year to the mid-40s currently
– mainly on the strength of a somewhat lower crop and the outlook for stronger cotton exports. But
that still leaves these tags well under levels prevailing a few years back.

Meantime, man-made fiber tags remain relatively weak – actually running 1.5 percent under a
year ago. This man-made fiber easiness should continue as global capacity takes a huge jump in 2002
– rising 24 percent to nearly 73 billion pounds. Cashmere is another shaky fiber these days – with
prices now hovering near historic lows.

Some Positive Signs

Before the year becomes history, some of 2002’s encouraging trends should be pointed out.
Profits for the industry as a whole are again in the plus column. Cone Mills, a firm hit with
losses last year, now reports a solid gain for the recently ended third quarter. Other outfits cite
similar results.

Another positive trend: a dramatic drawdown in top-heavy industry inventories. In the mill
sector, holdings have dropped an eye-opening 28 percent from year-and-a-half-ago peaks. And in the
textile product area, a continuing rise in sales has dropped this sector’s stock/sales ratio
significantly — from a near 1.60 months’ supply to only a 1.45 reading currently.

And last but not least, there’s the spate of industry shutdowns, reorganizations and
modernizations. When combined with the increasing number of new products, this should pave the way
for even more improvement through 2003 and beyond.

December 2002