BusinessWeek: January 11, 1993

Get Four
Free Issues

Subscribe to BW
Customer Service
ONLINE FEATURES Book Reviews BW Video Columnists Interactive Gallery Newsletters Past Covers Philanthropy Podcasts Special Reports BLOGS Auto Beat Bangalore Tigers Blogspotting Brand New Day Byte of the Apple Economics Unbound Eye on Asia Fine On Media Green Biz Hot Property Investing Insights Management IQ NEXT: Innovation NussbaumOnDesign Tech Beat Working Parents TECHNOLOGY J.D. Power Ratings Product Reviews Tech Stats Wildstrom: Tech Maven AUTOS Home Page Auto Reviews Classic Cars Car Care & Safety Hybrids INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads

Industry Outlook: Introduction

A VENUS IN BLUE JEANS

It has been 10 years since a U. S. textile company was a hot growth stock. But thanks to America's love affair with denim, that's what Cone Mills Corp. is these days. Since it reemerged as a public company in June, its shares have surged nearly 50%, to 14%. Analysts expect it to post a double-digit profit gain in 11/23, to about $50 million on $750 million in sales.

That's quite a tumaround for an obscure company that in 1984 was hobbled with $420 million in leveraged-buyout debt. At the time, imports and collapsing domestic demand had left Cone Mills with too much capacity for its main product, corduroy fabric. "It was like chasing a bouncing ball down the stairs," says Chief Executive Officer J. Patrick Danahy of the seven-year struggle that ended in the closing of eight corduroy plants. Last year, Cone used proceeds from its initial public offering to cut its debt in half, to $110 million.

Now, the company is the nation's largest denim producer, with a 25% market share. And given the back-to-basics trend of the '90s, that's a fine place to be. Cone makes denim in more than 360 colors and has an exclusive supply contract with Levi Strauss & Co. for its 501 blue jeans. It also sells to Calvin Klein, Lands End, L. L. Bean, Wrangler, Lee Apparel, and Oshkosh B'Gosh.

Imports aren't a worry at the moment, since a heavy fabric such as denim costs a lot to ship from the Far East. Besides, Cone Mills sells at 1980 prices, thanks to constant improvements in manufac turing efficiency and quality. In fact, Cone now exports about 25% of its denim. And Danahy, 48, who was named CEO in 1990, sees exports as a growth business.

CONTRARIAN MOVES. The Notre Dame University engineering grad isn't stopping there, however. He's on the prowl for acquisitions in the U. S. And because he thinks Congress will approve the North America Free Trade Agreement, he's scouting for joint ventures in Mexico and Central and South America. Next may come deals in Eastern Europe, China, and India.

Those are refreshing, contrarian moves in an industry that for years has complained about being damaged by textile imports but has done almost nothing to challenge foreign rivals in their markets.

Chuck Hawkins
TODAY'S MOST POPULAR STORIES

  1. Central Bank Buying Spurs a Gold Rush
  2. Look Who's Stalking Wal-Mart
  3. Amazon Paces Holiday Tech Discount Drive
  4. Tesco Lands Deal to Sell Apple iPhones
  5. Jim Rogers on Why Gold Is Glittering So Brightly

Get Free RSS Feed >>
  MARKET INFO
DJIA 10464.4 0.00
S&P 500 1110.63 0.00
Nasdaq 2176.05 0.00

Portfolio Service Update

Stock Lookup

Enter name or ticker



 




Copyright 1991-2009 by The McGraw-Hill Companies Inc. All rights reserved.
Terms of Use | Privacy Notice