HTT's Top 15 Supplier Giants

since last year's Supplier Giants report.

An uncertain U.S. economy, a falling American dollar, and a rapidly shifting

retail environment were only the start of the daunting challenges faced by the

nation's largest home fashions producer as it learned to deal with a demanding,

cost-conscious new parent, Brazilian terry producer Coteminas, and a new

organization structure as the U.S. partner in Springs Global. In a painful and

continuing strategic shift, this major Carolinas employer shuttered plants and

moved more production off-shore. And walking away from a challenging,

money-losing business, the company cut a deal to sell its area rug business to

C.S. Brooks, a long-time partner when it comes to spinning off unwanted

operations. As if to emphasize who writes the checks and counts the dollars at

Springs Global, Coteminas installed one of its own, Flavio Barbosa, with wide

experience in Latin American banking, as chief financial officer. Thinning out

the ranks of top management, Springs veteran Tom Gaffney left the company,

along with Chris Baker, who resigned as chief of global sourcing to join rival

WestPoint Home. In a major marketing shift, Springs did an about-face and

opened up its showroom floor and its entire product line to all its customers,

abandoning a recent practice of showing off product to a handful of key

retailer partners on a selective basis.

Out of bankruptcy and under a new owner, financier Carl Icahn, WestPoint

started to steer toward a turnaround with a fresh top management team,

shuttering inefficient U.S. manufacturing plants, partnering with off-shore

suppliers, and walking away from money-losing retail accounts. After years of

tumbling sales, the company stabilized the top line during the second half of

the year. Free of debt and with a cash infusion from its new owner, WestPoint

acquired a Bahrain bedding plant, and is now negotiating to buy another

off-shore bedding facility. Looking to spruce up its product lines, veteran

Albert Sardelli was brought in as design chief.

Getting its arms around the big home business it built up over the past several

years through a long string of acquisitions, Mohawk Home stabilized and grew

its sales in its core competence, rugs, following a 6% slide in the top line in

2005. Driving sales growth was a 20% surge in bath rugs and a solid 4% gain in

area rugs. But in businesses it understands less well, sales continued to

falter, down an estimated 7% in throws and another 4% in decorative

pillows.

Just running in place is something of an accomplishment in a tricky retail

environment and in a weakened environment for down. "Down comforters had a soft

year," said Eric Moen, president, slipping by 9%, to $97 million from $106

million in 2005. But picking up the slack was a stronger bed pillow business,

growing by 5%, to $136 million. An intense new focus is put on a portfolio of

brands that now includes Cannon, Eddie Bauer, Calvin Klein and Sealy. The sheet

business, while still small, virtually tripled in size in 2006 after getting a

boost from Consumer Reports, which lauded its Sealy brand sheets.

After years of stunning fast-track growth, 25% and more a year, it was

inevitable that the pace would slow as this pioneer producer of memory foam

products filled its niche and saturated the marketplace. Driving the top line

this year was 12% growth in its core foam pillows/toppers segment, layering on

an extra $30 million to reach $280 million. Sleep Innovations continues to

expand placements with existing accounts, and is also generating new sales

growth with its foam mattresses.

Firmly taking the reins as ceo after the 2005 death of his father, Leo, who had

built the company into a powerhouse, Jeff Hollander launched an aggressive

makeover of the company, jettisoning the fashion business to focus on basics.

"Even if you take that fashion business out of the numbers, sales of our

continuing businesses were up 8% to 10%, exceeding our expectations," said

Hollander. "We thought we'd do 6% or 7% as an increase." But this year growth

will moderate, he said, in the range of 5%. Shucking off the fashion business,

while taking a bite out of sales, "helps us use our resources, people and space

better. More importantly, it's helped our profits."

relatively recent entrant into the ranks of the Top 15 home fashions suppliers,

Shaw continued to grow in 2006, helped by a solid 5% increase in rugs, to $231

million, solidifying its position in that category. In area rugs, Shaw

maintained its core programs, making small gains in market share, and continued

to grow its imports. Bath rugs also grew by 5%, to $57 million from $54 million

the preceding year, helped by imported cotton programs and improved business

with top-tier retailers, including department stores.

It was only a matter of time before this rapidly growing Indian terry producer

broke into the top tier of U.S. home fashions producers, and it did so last

year pushing sales up an impressive 52.2% to become the third-ranking U.S.

producer, not that far behind Springs Global. If you want to know how feisty

Welspun did it, just take a look at WestPoint Home, where towel sales were off

by 16% last year, following an even scarier slide of 28% in 2005. And look at

Welspun's towels piled high at Linens 'n Things. Not content to take a bite out

of the towel market, now Welspun is setting its sights on sheets, growing its

business there to $93 million, becoming the nation's fifth-largest U.S.

supplier.

Still running ahead, if not as fast as years ago when it piled on strong

double-digit growth, Maples grew its business by almost 4%, layering on an

additional $10 million to the top line. All of last year's growth came out of

the company's bath rug business, its smallest, which grew by 9% to $120 million

from $110 million in 2005, helped by new placements generated by the Cannon

brand. The larger area rug business was flat, however, stuck at $150 million,

holding on to its core customers at discount and mid-level department

stores.

Growth can be tough to come by, even for fast-track companies, as markets

mature — and faced with a tricky retail environment and sluggish consumer

spending. After quietly flying under the radar for years, the notoriously

private Franco dipped modestly, by 3.3%, to an estimated $260 million. Sales

edged up slightly in its sheet business as core customers walked away, balking

at dealing with a middleman. Sales grew at a stronger pace in kitchen textiles,

by 4.4%, to $71 million from $68 million, holding their own at discounters and

expanding distribution under proprietary retail brands.

Coming down to earth and running in place after years of propulsive growth,

Croscill ran flat at $258 million, holding steady after a drop of 5.1% the

prior year. It was a painful year of rethinking and rebuilding following the

sudden death of visionary ceo David Kahn the year before and the illness of the

highly respected family patriarch Mike Kahn. With another Kahn scion, Doug,

taking the reins, the company continued to move production off-shore. Sales,

said Doug Kahn, held steady in each of the company's key product

categories.

The window business continued to rack up solid growth, growing by 9% to $152

million, reported ceo Frank Foley, as retailers showed more interest in higher

price points and trade-up items. There was solid growth in bedding as well,

said Foley, "but unfortunately there was no such interest in higher price

points." The bath business grew at an aggressive pace, helped by a growing

accessories business. But a major sticking point, he said, was the Donna Karan

Home business, which fell off in the range of 30%. "But we're working on that

now and expect substantial improvement next year." A major task at hand, said

Foley, is rethinking the CHF business model. "It no longer pays to deal with

some people. You have to walk away from some of them. The reality is there's no

value-added any longer in building market share. All you get these days is

value-less. It gets you nothing to be the biggest."

With the bottom falling out of the quilt market for most suppliers, and its

comforter business falling off at a double-digit pace, the once high-flying

American Pacific recorded a drop in sales of roughly $44 million. Despite a

roster of designer licenses, comforter sales fell by 14% in 2006, to $164

million from $190 million, as some of those licenses ran out of gas at key

accounts, making way for retailers' private-label brands. Playing musical

chairs once again, the company appears poised to take on a new dance partner,

reportedly readying its sale to an Indian textiles producer.

The latest U.S. supplier to fly under a foreign flag, straight out of

bankruptcy Dan River was acquired by GHCL, a producer based in New Delhi. All

of the company's remaining U.S. plants were shuttered, with goods coming in

from India, China, and Pakistan. Securing a steady outlet for its product, GHCL

then bought a U.K. retail chain, and said it's negotiating to buy a major U.S.

home fashions retailer, as well as other chains in Europe. Building a beachhead

in the institutional market, in December GHCL/Dan River acquired Baker Linen, a

century-old supplier to the hotel and hospital trade. Letting retailers know

it's still alive and kicking, Dan River put an astonishing 65-plus beds on its

show floor during the fall home fashions market.

Running in place despite declines in some of its key businesses, Louisville

went through another "roller-coaster year," said Steve Elias, ceo. The gainer

last year was the bed pillow business, where sales improved by 14%, to $50

million, helping to offset weakness elsewhere, notably the mattress pad

segment, where sales fell 10% to $90 million. Running in place was enough of a

challenge, said Elias, "in the face of retail consolidation, inventory

management tightening at key retailers, overseas competition, and continued

escalation of raw material prices." Elias said a focal point was pillows, where

Louisville "made a number of changes that have enabled our operating

efficiencies, putting us in a position to capture more market share at key

volume price points."