WPS: A bit of progress on the long road back
By Staff -- Home Textiles Today, 11/17/2003
WESTPOINT, GA — Steering for a turnaround as it works its way through bankruptcy, WestPoint Stevens cut its losses, stabilized sales, slashed its costs and boosted its operating profit by more than a third during the third quarter.
Still tied down by bankruptcy and restructuring costs as it streamlines its operations, the nation's second-largest home fashions producer generated a $12.8 million loss during the quarter, but managed to cut its losses by more than 20 percent from year ago levels, to $12.8 million from $16.6 million.
Crucial to its cash flow, the major mill stabilized its sales, and stanched the double-digit and stanched the double-digit sales declines. Sales dipped by just 3.3 percent during the period, to $445.2 million from $460.5 million last year — a big improvement over the 19 percent drop in sales during the second quarter, and a 13 percent decline during the first three months of the year.
Importantly, the major mill seems to have stabilized sales on its own, without much early help from the collapse of Pillowtex. "Chip" Fontenot, WestPoint ceo, earlier told Home Textiles Today the company had not been a principal beneficiary of the demise of its rival.
WPS also kept hacking away at costs, reducing its operating expenses by almost $12 million during the period. Operating costs were whittled down by 16.5 percent, to $58.9 million from $70.6 million last year, generating a cash savings of $11.7 million.
The mill also began to stabilize margins, which had slipped precipitously as plants ran slower during after sales began to collapse. Holding relatively steady, average gross margin narrowed by 70 basis points, or seven-tenths of a percentage point, to 17.9 percent from 18.6 percent.
Helped by the lower costs, and improving trends in sales and margins, operating profits jumped by more than a third, up 36.1 percent, to $20.7 million from $15.2 million last year. In a further savings, WPS pared its inventories by 2.9 percent from year-ago levels, to $419.9 million from $432.6 million, a savings of $12.7 million.
Ceo Fontenot commented, "The third quarter saw improving retail sales, and reorder activity returned to more acceptable levels. We were especially gratified by a strong response by retailers to our product introductions at the Home Fashions Market last month."
| Qtr. 9/30 (x000) | 2003 | 2002 | % chg |
| Sales | $445,160 | $460,454 | -3.3 |
| Oper. income (EBIT) | 20,661 | 15,177 | 36.1 |
| Net income | (12,802)a | (16,609)a | — |
| Per share (diluted) | (0.26) | (0.33) | — |
| Average gross margin | 17.9% | 18.6% | — |
| SG&A expenses | 13.2% | 15.3% | — |
| Nine months | |||
| Sales | 1,190,118 | 1,345,170 | — |
| Oper. income (EBIT) | 27,357 | 92,237 | -70.3 |
| Net income | (101,755)b | (12,598)b | — |
| Per share (diluted) | (2.04) | (0.25) | — |
| Average gross margin | 17.7% | 22.1% | — |
| SG&A expenses | 15.4% | 15.2% | — |
| (loss) a-Third-quarter results include a $967,000 restructuring and impairment charge, compared with $5.9 million last year; $3.8 million in miscellaneous expenses, compared with $1.5 million last year; $12.7 million in Chapter 11 expenses; and an income-tax benefit of $3.2 million vs. $9.3 million last year. b-Nine-month results include a $14.3 million restructuring and impairment charge, compared with $5.9 million last year; a $46.3 million goodwill impairment charge; $14.2 million in miscellaneous expenses, compared with $5.6 million last year; $19.0 million in Chapter 11 expenses; and an income-tax benefit of $47.5 million vs. $7.1 million last year. |
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