Unifi Inc. is lowering prices even as it ramps up its yarn capacity in the Americas to keep its customers in the apparel industry happy.
The North Carolina manufacturer reported that while it sold 6.8 percent more of its polyester and nylon yarns during the fiscal second quarter ended Dec. 28, 2014, its prices dropped 5.2 percent on a consolidated basis as its customers in the apparel, automobile and home furnishing industries demanded it pass along savings from lower oil prices.
“There's a lot of pressure out there today for the lower prices,” said Bill Jasper, Unifi's Chairman and CEO while discussing the company's earnings for the second fiscal quarter ended Dec. 28, 2014. “People see that oil is dropping significantly, and they know that that's related to our raw materials. And they are asking for the relief.”
UFI reported Jan. 20 that net income jumped by $3 million to $9.4 million in the period on a 1.6 percent increase in net sales, which reached $23.3 million. Gross margin increased 280 basis points to 14.3 percent. The company attributed the sales gains primarily to higher volume, which was partially offset by devaluation of the Brazilian real. UFI executives predicted the weak real will fuel UFI's Brazilian sales in coming quarters as the country's manufacturers gain a price advantage over imports.
A new deal with The North Face
The company's Repreve polyester yarn, which is made from recycled PET water bottles, is becoming increasingly popular as apparel brands looking to enhance their sustainability stories.
Last week, for instance, The North Face announced it will begin incorporating Repreve Textile Takeback yarn into its Denali fleece jackets. The yarn is made by recycling fabric waste generated during the production of the Denali. That yarn will be combined with Repreve yarn made from recycled plastic bottles to knit fabrics for Denali jackets. The companies estimate that every 10 Denali jackets manufactured will generate enough fabric to make four more.
Athleisure, nearsourcing boosting demand
Jasper said he sees two other trends driving demand for UFI's yarns in coming years. First, brands and retailers already using UFI yarns are telling the company they want to shift production of more complicated garments now sourced from Asia to the CAFTA region to shorten leads times and reduce working capital needs. Secondly, natural fiber brands are increasing their synthetic offerings in response to the athleisure trend.
“One very positive trend for Unifi is that the share of synthetic apparel from all countries is expected to reach 52 percent for 2014 once full-year data is reported, which would mark the first time that the share of synthetic apparel will be greater than cotton apparel,” explained UFI President and COO Roger Berrier. “This supports the trends we see in retail as more and more brands are incorporating more performance apparel in their products.”
So, despite a decline in global demand for basic polyester yarn, UFI plans to install 12 new yarn texturing machines at its plants in North Carolina and El Salvador this year to boost capacity and enable smaller production runs.
“They will need more volume from us, and they want to see us making that investment,” Jasper said of apparel brands and retailers eager to reduce lead times and working capital. “And they see us putting in the machines, and it gives them confidence to go ahead and look to move these programs back to the region.”
