Tough Times: An Overview of the U.S. Textile and Apparel Industries

Sunday, April 05, 2009

Last year, I wrote a paper on the general condition of the U.S. textile and apparel industries. Following are some excerpts from that paper. To download the entire paper, please click HERE.

The U.S. textile and apparel industries have undergone significant structural changes over the past two decades resulting in a sharp decline in domestic production, overall loss of industry profitability and a crisis in viability.

As an industry sector in decline, there are several key measures that highlight the structural deficiencies in the U.S. textile and apparel complex: employment, productivity and prices.

Higher productivity has failed to stem the declines posted in the industry, though these industries have shown more resilience in the face of import competition than other U.S. manufacturing industries.

The U.S. textile industry (textile mills and textile product mills) includes nearly 10,000 companies with combined annual sales of $65 billion. Faced with stepped up foreign competition, the industry has been forced to sharply consolidate. As a result, the industry is now largely concentrated in the hands of a comparatively few firms. For example, the largest 50 mills account for nearly two-thirds of U.S. production. At the same time, only about 100 firms have annual sales in excess of $100 million.

Demand for textiles is driven by the domestic apparel industry and consumer demand for home textiles such as carpets, curtains and upholstery fabrics. Profitability of textile mills is a direct result of technologically efficient operations and in many cases significant economies of scale in production for certain commodity fabrics. Whereas larger mills enjoy a competitive advantage due to economies of scale, smaller mills have been forced into high-value added specialty niche markets in order to survive. Nevertheless, the industry has become far more automated in an attempt to compete with low cost imports, though high labor costs still remain a significant cost component for domestic mills. Average annual revenue per employee is under $170,000.

Cash flow can be uneven for smaller mills because orders and production can be uneven, while inventory levels may be high for mills that produce commodity products (such as carpets). Receivables are also typically high for domestic mills. In order to offset extreme price-sensitivity, domestic mills often rely on technology to improve their overall financial performance. Investment in new machinery (spinning, weaving, etc.) is less than five percent of sales, on average, but can be higher in specialty segments.

Major products of the industry include yarns, threads, fabrics, carpets, rugs, bags, linens and curtains and virtually all these products use a wide range of fibers including cotton, wool and synthetics. Fabrics account for about 40 percent of industry revenue, while carpets account for 20 percent and yarn and threads make up 20 percent. The remaining 20 percent of production is primarily of home textiles and linens.

Textile firms sell to apparel manufacturers, furniture manufacturers, other textile companies and various retailers. The end-uses of U.S. textiles (measured in pounds) are in apparel (35 percent); floor coverings (25 percent); industrial uses (23 percent) and home textiles (16 percent).

With declines in U.S. apparel shipments, the composition of textile production in the United States has shifted away from fabrics for use in apparel to fabrics for use in home furnishing applications and other industrial uses.

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