July 2016 - Great American Group

JULY 2016
Textiles
VOLUME
218
COTTON PRICING
SYNTHETICS STRUGGLE
APPAREL STEADY
High global stocking levels offset the
positive influence of rising demand
Low input pricing continues to burden
the industry
Strong demand in the retail sector and
growing capital investments fuel the
market
Deals are a moving target. A constantly shifting mix of people, numbers,
and timing. We’re here to simplify this process for you. Our experts are
dedicated to tracking down and Ŷushing out the values you need, even
on the most complex deals. So when the time comes to take your shot
with Great American, you’re always—right on the money.
GREATAMERICAN.COM
© 2016 GREAT AMERICAN GROUP, LLC. ALL RIGHTS RESERVED
In This Issue
04
05
06
07
09
Trend Tracker
Overview
Recent Appraisal Trends
Pricing Trends
10
11
12
13
Monitor Information
Experience
Apprasial & Valuation Team
About Great American Group
Textiles and Apparel Reference
Sheet
MONITOR TEXTILES
GREATAMERICAN.COM
JULY 2016
800-45-GREAT
VOLUME
218
LOS ANGELES (HQ)
21860 Burbank Blvd.
Suite 300 South
Woodland Hills, CA 91367
T 818.884.3737
F 818.884.2976
NEW YORK
Graybar Building
420 Lexington Avenue
Suite 3001
New York, NY 10170
T 917.464.1521
ATLANTA
1200 Abernathy Rd.
Suite 1700
Atlanta, GA 30328
T 770.551.8115
BOSTON
300 First Avenue
Suite 201
Needham, MA 02494
T 781.444.1400
F 781.444.1401
CHICAGO
10 South LaSalle St.
Suite 2170
Chicago, IL 60603
T 312.777.7950
F 312.777.7948
CHARLOTTE, NC
15720 Brixham Hill Ave.
Suite 300
Charlotte, NC 28277
T 704.227.7161
F 704.227.7171
MILWAUKEE
10850 West Park Place
Suite 970
Milwaukee, WI 53224
T 414.831.2850
WILTON, CT
73 Old Ridgefield Road
Suite 6
Wilton, CT 06897
T 203.663.5101
GERMANY
Prinzregentenstr 18
Fifth Floor
80538 Munchen,
Germany
AUSTRALIA
Level 29, Chifley Tower
2 Chifley Square
Sydney, NSW 2000
Australia
DALLAS
2745 North Dallas Parkway
Suite 660
Plano, TX 75093
T 972.996.5630
F 972.996.5639
© 2016 Great American Group, LLC. All Rights Reserved.
Trend Tracker
•
INVENTORY
NOLVs: NOLVS were mixed in the fist half of
the year due to offsetting factors. Lower input
Textiles
costs have positively impacted gross margins,
Apparel
while competitive pricing pressures have had
NOLVs
negative impacts. However, company-specific
Mixed
Mixed
factors had varying impacts on NOLVs; these
Mixed
Mixed
Gross Margin
Increasing
Mixed
Inventory
Increasing
Increasing
Sales Trend
factors included new product launches,
customer additions/subtractions and inventory
mix changes.
•
Pricing
Decreasing
Sales Trends: Sales were mixed depending on
the market sector. Falling commodity prices
Decreasing
and a declining oil and gas industry negatively
impacted sales revenue, while improved
market conditions in the healthcare and
Market Prices
hospitality sectors along with other companyspecific activities drove revenue increases in
Three Months
Cotton
Increasing
other transactions.
Year
Decreasing
•
Gross Margin: Gross margins for textiles have
generally increased due to the declines in raw
Synthetics
Mixed
Mixed
material prices based on falling oil prices.
However, competitive pricing pressures offset
many gains. Gross margins were positively
impacted for apparel based on acquisition
costs, which was offset by continued softness
in the retail market.
•
Inventory: Inventory levels have increased
due to seasonal factors, such as an unusually
warm winter driving up inventory levels and
other company-related activities within the
textiles industry. Apparel inventory levels were
also impacted by shifts in product mixes.
•
Pricing: Pricing has generally decreased for
textiles and apparel due to softness in demand
and competitive pricing pressures.
4 | MONITOR TEXTILES JULY 2016
Overview
Despite remaining strong in early 2016, the textiles market continues to be affected by sluggish economic
growth both in the U.S. and abroad in China. Low oil prices, minimal growth, declining productivity, and
other factors have placed the domestic economy on uneven ground. Furthermore, while a strong U.S. dollar
has resulted in rising capital expenditures for the textile industry, it has also slowed exports. Notwithstanding
these economic obstacles, the economy remains healthy overall, as unemployment has maintained at levels
lower than 2015 and disposable income has increased in recent months.
After achieving year-over-year sales growth throughout 2015,
to face obstacles largely similar to those that have plagued it
the U.S. retail industry has started the year off strong, per
in recent years. The strengthening U.S. dollar and struggling
the National Retail Federation (“NRF”). The industry rang in
Chinese yuan have resulted in declining exports and rising
the New Year with unadjusted year-over-year gains of 1.4% in
competition from lower-cost imports from overseas. Textile
January and 3.8% in February. Most recently, May saw retail
and apparel imports continue to be steady, feeding the
sales rise 3.2% over the prior year, as consumer spending
domestic demand.
remained strong, buoyed by the continued improvement of
the labor market. These findings reinforced the NRF’s positive
The figure below illustrates the producer price index, which
second-quarter outlook for both the retail industry and the
denotes the selling prices received by domestic producers for
economy as a whole.
their output, for textile mills versus textile product mills from
June 2015 through May 2016. Textile mills include a variety
Going forward, the NRF expects this trend to continue, as it
of processes such as yarn spinning; primary textile products
projects year-over-year industry growth of 3.1% in 2016, which
manufacturing; intermediate yarn processes; fabric and
is 0.4 percentage points higher than the 10-year average.
thread weaving and braiding; and production of nonwoven
As has become standard in the retail world, e-commerce
fabrics and textile finishing for both cotton and synthetic
sales are expected to outpace the rest of the industry with
fibers. Textile product mills include carpet and rug mills;
forecasted growth of approximately 6% to 9%. Wage and
curtain and drapery mills; various household textile product
job market improvement throughout the economy will help
mills; canvases; cordage mills; and other downstream textile
empower consumers, even as international headwinds across
processes and products.
the globe create uncertainty. Low gas prices are slated to
encourage discretionary spending, as well.
Although macroeconomic factors aid the stability of the
textiles industry, the current market is largely being shaped
by the cost of inputs. Despite an uptick in gasoline prices in
recent months, the U.S. Department of Energy reports that
pricing remains well below year ago levels, while heating oil
and natural gas have followed similar trajectories, putting
pricing pressures on synthetic fibers. Cotton pricing has
remained similarly constrained over the past year.
Despite positive economic indicators, the industry continues
5 | MONITOR TEXTILES JULY 2016
Recent Appraisal Trends
TEXTILES
Through the early months of 2016, GA has observed varying
factors impact NOLVs among manufacturers and distributors
in the textile industry. As stated in prior Monitors, and
consistent with many manufacturing industries, low crude
oil prices have been reflected in improved acquisition costs,
which have benefitted gross margins in many cases. Cotton
prices peaked in May 2015 at $0.73 per pound before falling
during the second half of the year. Pricing remains depressed
in 2016, with the calendar year average for the year thus far
standing at $0.68 per pound.
The positive impact that low commodity fiber pricing has had
on gross margins was partially offset by increased competition
within the industry, both domestically and abroad. Despite
this, gross margins in the industry overall increased. In some
instances, new product launches and customer additions
also have impacted NOLVs. The overall decline in the oil and
helped revenues, while domestic demand for textiles has
gas industry has hurt sales revenue levels and represents a
remained largely soft and has been further hampered by the
difficult obstacle for operators throughout the industry.
continual rise of lower cost imports.
APPAREL
As noted in the prior Textiles Monitor, the apparel industry
has mirrored the state of the textiles industry in many cases
during the first half of 2016. While overall retail demand has
remained largely steady, softness in certain categories has
caused mixed gross margins despite low acquisition costs.
Low pricing for commodities remains the one consistent factor
across both the textiles and apparel industries.
Competitive pressures and the previously mentioned softness
in certain categories caused a drop in apparel pricing, while
shifting product mixes have increased inventory levels.
Similar to the textiles industry, company-specific factors such
The recent strength of the healthcare and hospitality sectors
as product launches and inventory mix changes, have had
continued to drive revenue gains in some instances.
varying affects on NOLVs.
Despite the relatively stable state of the market, companyspecific factors still play a role in impacting NOLVs. In early
2016, shifts in product mixes and changes to customer bases
6 | MONITOR TEXTILES JULY 2016
Pricing Trends
COTTON
as minor growth for global mill-use, and slight declines in
According to the Cotlook “A” Index, market prices for
trade and world ending stocks. The U.S. cotton harvest in
cotton have continued to decline over the past two years,
2016 is expected to amount to approximately 104.4 million
and continue to remain weak in early 2016 despite recent
bales, equating to a 4.8% increase over last year’s output,
increases. In April 2014, the Cotlook “A” Index stood at $0.94
but representing a low figure when compared to the 10-year
per pound before falling to $0.67 per pound by January 2015.
average of 116.3 million bales. Capital expenditures in the
Since then, pricing has remained low, with only minor pricing
industry have been high in recent years, as investments have
movements. As of May 2016, the index increased for the
grown 87% from 2009 to 2014, according to TextileWorld.
second consecutive month and stood at $0.70 per pound,
an increase from $0.69 per pound the previous month but
Despite estimates for 2016-2017 predicting a slight decline
down from the May 2015 figure of $0.73. The calendar year
in supply and an increase in demand, inventories remain
average for 2016 thus far remains at $0.68, down from the
exceedingly healthy. Furthermore, sluggish cotton demand,
average of $0.70 the year before. As of early July 2016, spot
the strengthening U.S. dollar, declining imports from China,
pricing stood at $0.76 per pound.
and struggles for other commodity markets have resulted in a
bearish environment for U.S. cotton prices and will likely result
The International Cotton Advisory Committee reports that
in another difficult year for the cotton industry.
the 2015 season represents the first time global cotton
production failed to meet demand in five years. The USDA
The Cotlook Index represents the average of the five cheapest
released its complete estimates for the coming crop year in
quotations for principal upland cottons traded on the
May, forecasting the increase in cotton production, as well
international market:
1
Monthly Average Cotlook "A" Index Pricing Trend -
7 | MONITOR TEXTILES JULY 2016
Pricing Trends
APPAREL
domestic manufacturers. In the domestic manufacturing
Apparel sales results in 2015 were mixed. Certain sectors,
sector, the value of U.S. man-made fiber and filament,
such as specialty apparel retailers and department stores,
textile, and apparel shipments totaled $76 billion in 2015,
struggled to attract customers while unseasonably warm
an increase of approximately 14% since 2009, according
winter weather hampered sales of coats, sweaters, boots,
to TextileWorld. Furthermore, improving technologies
and other cold-weather apparel. Conversely, off-price
and investments in new plants will continue to increase
retailers continued to perform well throughout the year.
efficiencies and lower costs. Analysts believe these factors
In general, one apparel trend that continued to perform
will offset the soft demand in certain categories and allow
well throughout the year was activewear and athletic
the industry to continue to make modest improvements for
footwear, due largely to the rise of “athleisure” fashion, in
the remainder of 2016.
which consumers prefer activewear to denim for recreation,
lounging, and every day wear.
The figure below illustrates the apparel producer price
index, which denotes the selling prices received by
So far in 2016, sales at clothing and accessories stores
domestic producers for their output. While low input costs
have experienced slight gains. The U.S. Department of
kept the index at consistently shallow levels in 2015, a
Commerce reports that for the first four months of 2016,
recent marginal increase has resulted in a slight rise in
clothing and accessories stores generated $76.1 billion
early 2016. Prices remain low, despite being slightly above
in sales, a 1.9% increase over the same timeframe last
year-ago levels.
year. Low fiber costs continue to drive profit margins for
2
Apparel Producer Price Index
8 | MONITOR TEXTILES JULY 2016
Pricing Trends
SYNTHETIC FIBERS
Consistent with the prior Monitor, continued low prices for
crude oil and natural gas have left synthetic fiber pricing
depressed in early 2016. According to Emerging Textiles,
despite crude oil prices and other polyester input prices
rising slightly in recent months, polyester prices in China
have bottomed out. Although there is not always an absolute
correlation between crude oil pricing and polyester pricing,
due to the many intermediary production stages of the
synthetic fiber, Emerging Textiles notes that the extreme
decline in crude oil pricing in the previous months certainly
affected polyester. As such, analysts believe that although
there may be a small uptick in polyester pricing in the near
future to reflect the recent growth for oil, overall polyester fiber
prices will remain weak.
In recent months polyester staple fiber pricing has displayed
resiliency, largely remaining steady in early 2016 and even
increasing marginally. Limited product availability in China
and strong demand assisted market strength, while pricing
for certain segments of the polyester supply chain, such as
naphtha, purified terephthalic acid, and paraxylene have
struggled through the beginning of 2016.
Textiles and Apparel Reference Sheet
PRICNG TREND CHANGES FOR MAY 2016 VERSUS APRIL 2016 AND THE FIRST QUARTER OF 2016
% Change
Commodity
Cotton
From April 2016
From Q1 2016 Average
1.4%
5.0%
14.9%
41.1%
-
(4.0%)
Synthetic Fiber Feedstocks
Crude Oil
Natural Gas
9 | MONITOR TEXTILES JULY 2016
Monitor Information
The Textiles Monitor relates information covering most
Should you need any further information or wish to discuss
textile and apparel products, including industry trends,
recovery ranges for a particular segment, please feel free to
market pricing, and their relation to our valuation process.
contact your GA Business Development Officer.
GA provides our customer base with a concise document
highlighting the textiles and apparel industry.
GA’s Textiles Monitor provides market value and industry
trend information for a variety of textile products. The
Due to the commodity nature of certain textile products,
information contained herein is based on a composite of
timely reporting is necessary to understand an ever-changing
GA’s industry expertise, contact with industry personnel,
marketplace. GA strives to contextualize important indicators
industry publications, liquidation and appraisal experience,
in order to provide a more in-depth perspective of the
and data compiled from a variety of well-respected sources
market as a whole.
believed to be reliable.
GA internally tracks recovery ranges for cotton fabrics and
GA does not make any representation or warranty, expressed
apparel, greige goods, specialty textiles, synthetic fibers such
or implied, as to the accuracy or completeness of the
as nylon and polyester, and a wide variety of apparel in all
information contained in this issue. Neither GA nor any of its
price points, but we are mindful to adhere to your request for
representatives shall be liable for use of any of the information
a simple reference document.
in this issue or any errors therein or omissions therefrom.
10 | MONITOR TEXTILES JULY 2016
Experience
LIQUIDATIONS
•
GA has been involved in the liquidation of select industrial
manufacturers and wholesalers such as Atlas Textiles, Garment
Producers of various apparel types, including headwear,
sweaters, and sporting apparel.
•
Services, Seatco, and Textile Alliance, store locations for Jo-Ann
A manufacturer of tufted carpets from synthetic fibers serving
residential and commercial applications.
Fabrics, Hancock Fabrics, and A.C. Moore, and numerous apparel
retail stores such as Love Culture, Fashion Bug, Target Canada,
GA additionally maintains appraisal experience involving more
Jones New York Canada, Kids Mart, Clothestime, Mervyns,
regionalized and specialized companies, allowing for the utmost
and Eddie Bauer. Other industrial machinery and equipment
depth in our valuations:
liquidations include Alfani Shirts, Barth & Dreyfus, Belding
Hausman, Linens & Things, Rock and Republic Jeans, Teddi of
•
Textile spinning mills producing fabric for the apparel,
•
Distributors of fabrics for furniture, apparel, and other
California, and Textile Alliance.
automotive, and home textile industries.
APPRAISALS
In addition, GA has worked with and appraised numerous
applications.
•
Manufacturers and distributors of apparel, rugs, and other
•
Manufacturers and distributors of cotton, polyester, nylon, and
manufacturers and distributors within the textiles and apparel
industries. While our appraisal clients remain confidential, GA's
woven fabric products.
extensive list of appraisal experience includes the following
sampling of companies:
•
•
Manufacturers of performance synthetic fabrics.
•
Retailers of textile products and apparel.
fibers, with annual net sales exceeding $3.0 billion.
•
Distributors of fabrics for furniture, apparel, and other
One of the largest manufacturers of performance synthetic
applications.
•
Manufacturers and distributors of apparel, rugs, and other
woven fabric products.
A wholesale distributor of imprintable apparel, including
t-shirts, fleece apparel, sports shirts, headwear, and athletic
In addition to our vast liquidation and appraisal experience, GA
wear, with net sales exceeding $700 million annually.
maintains contacts within the textile and apparel industry that we
An industry leader in textile and chemical products, which
utilize for insight and perspective on recovery values.
include denim, dyed fabrics, and flame retardant fabrics for
use in apparel and home furnishings.
•
Spinners of cotton yarn.
•
weights, textures, and technical functions.
•
•
One of the world’s largest integrated producers of synthetic
fabrics, offering over 480 styles of synthetic fabric with varying
•
acrylic fibers and specialty fabrics for various industries.
One of the U.S.’s foremost producers of retail fabrics, specialty
fabrics, and craft products, manufacturing goods in a wide
variety of synthetic fibers.
•
A manufacturer of cotton-nylon greige fabrics used in the
•
A designer and manufacturer of various home textiles,
design of military and fire retardant apparel.
including linens, sheets, towels, aprons, uniforms, curtains,
and pillows, among many others.
11 | MONITOR TEXTILES JULY 2016
Appraisal & Valuation Team
BUSINESS DEVELOPMENT
Mike Marchlik
National Sales & Marketing Director
(818) 917-8175
[email protected]
Daniel J. Williams
Managing Director
New York Region
(908) 251-3580
[email protected]
Ryan Mulcunry
Executive Vice President
Northeast Region, Canada & Europe
(857) 231-1711
[email protected]
Drew Jakubek
Managing Director
Southwest Region
(214) 455-7081
[email protected]
David Seiden
Executive Vice President
Southeast Region
(404) 808-8153
[email protected]
Jeffrey W. Christner
Relationship Manager
WI, PA
(773) 559-7516
[email protected]
Bill Soncini
Senior Vice President
Midwest Region
(773) 495-4534
[email protected]
Bryan Fischer
Relationship Manager
CO, KS, MO, UT
(857) 540-1319
bfi[email protected]
Jennie Kim
Vice President
Western Region
(818) 974-0602
[email protected]
OPERATIONS
Michael Petruski
Executive Vice President
(704) 227-7161
[email protected]
Bill O'Brien
Managing Director
(781) 429-4073
[email protected]
ASSET DISPOSITION TEAM
Scott Carpenter
President, GA Retail Solutions
(818) 884-3737
[email protected]
12 | MONITOR TEXTILES JULY 2016
Adam Alexander
President, GA Global Partners
(818) 884-3737
[email protected]
About Great American Group
Great American Group is a leading provider of asset
provider of investment products to institutional and high net
disposition solutions and valuation and appraisal services to
worth investors, and B. Riley Wealth Management (formerly
a wide range of retail, wholesale, and industrial clients, as
MK Capital Advisors), a multi-family office practice and
well as lenders, capital providers, private equity investors,
wealth management firm focused on the needs of ultra-
and professional services firms. In addition to the Textiles
high net worth individuals and families; and Great American
Monitor, GA also provides clients with industry expertise in
Capital Partners, a provider of senior secured loans and
the form of monitors for the chemicals and plastics, metals,
second lien secured loan facilities to middle market public
food, and paper and packaging sectors, among many others.
and private U.S. companies.
For more information, please visit www.greatamerican.com.
B. Riley Financial, Inc. is headquartered in Los Angeles
Great American Group, LLC is a wholly owned subsidiary
with offices in major financial markets throughout the
of B. Riley Financial, Inc. (NASDAQ: RILY), a diversified
United States and Europe. For more information on B. Riley
provider of collaborative financial and business advisory
Financial, Inc., please visit www.brileyfin.com.
services through several subsidiaries, including: B. Riley &
Co. LLC, a leading investment bank and a FINRA & SIPC
member, which provides corporate finance, research, and
sales & trading to corporate, institutional and high net worth
individual clients; Great American Group, LLC; B. Riley
Capital Management, LLC, an SEC registered Investment
Advisor, which includes B. Riley Asset Management, a
MONITOR TEXTILES
GREATAMERICAN.COM
JULY 2016
800-45-GREAT
VOLUME
218
LOS ANGELES (HQ)
21860 Burbank Blvd.
Suite 300 South
Woodland Hills, CA 91367
T 818.884.3737
F 818.884.2976
NEW YORK
Graybar Building
420 Lexington Avenue
Suite 3001
New York, NY 10170
T 917.464.1521
ATLANTA
1200 Abernathy Rd.
Suite 1700
Atlanta, GA 30328
T 770.551.8115
BOSTON
300 First Avenue
Suite 201
Needham, MA 02494
T 781.444.1400
F 781.444.1401
CHICAGO
10 South LaSalle St.
Suite 2170
Chicago, IL 60603
T 312.777.7950
F 312.777.7948
CHARLOTTE, NC
15720 Brixham Hill Ave.
Suite 300
Charlotte, NC 28277
T 704.227.7161
F 704.227.7171
MILWAUKEE
10850 West Park Place
Suite 970
Milwaukee, WI 53224
T 414.831.2850
WILTON, CT
73 Old Ridgefield Road
Suite 6
Wilton, CT 06897
T 203.663.5101
GERMANY
Prinzregentenstr 18
Fifth Floor
80538 Munchen,
Germany
AUSTRALIA
Level 29, Chifley Tower
2 Chifley Square
Sydney, NSW 2000
Australia
13 | MONITOR TEXTILES JULY 2016
DALLAS
2745 North Dallas Parkway
Suite 660
Plano, TX 75093
T 972.996.5630
F 972.996.5639
© 2016 Great American Group, LLC. All Rights Reserved.