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Apparel sales down 13.8% at Ennis in FY'12
24 Apr '12
5 min read
“While the spot price of cotton has dropped significantly over the last half of our fiscal year, this unfortunately does not represent the cost of cotton in our finished good inventory or most large apparel manufacturers' finished goods inventory. Most large manufacturers locked in cotton contracts in order to guarantee an uninterrupted supply of cotton and price stability.
“Unfortunately, these locked in prices are significantly higher than the current spot price. As such, large manufacturers, such as Alstyle, have had to navigate through this issue over the past quarter or so. We expect this to continue until the current lower priced cotton makes its way through our finished goods inventory.
“In addition, pricing in the marketplace has not been consistent with these higher costs, thus putting additional pressures on apparel margins. Products are being sold in the marketplace at prices, in certain circumstances, less than the associated raw material costs.
“Our philosophy has always been to try to at least cover our costs in our pricing. Consequently, we feel this has and will impact our apparel sales in the short-term. Therefore, while fiscal year 2012 was challenging, we view fiscal year 2013 to be equally challenging, due to the high priced cotton overhang in inventories and current market pricing on the sell side.
“We do feel that our new manufacturing facility in Agua Prieta, Mexico, coupled with our strong balance sheet and our print operations, places us in a better position than most to weather the storm. While the short-term landscape for apparel appears somewhat challenged, the two Print acquisitions will help offset those challenges from an earnings and sales perspective in the next year.
“We feel good about the long-term prospects of both sectors and as such our Board approved an increase in our share buy-back program and recently announced a 13% increase in our quarterly dividend amount. No matter what directions fiscal year 2013 takes, you can be assured that we will remain vigilant to the task at hand.”
Ennis, Inc. is primarily engaged in the production of and sale of business forms, apparel and other business products.
“Unfortunately, these locked in prices are significantly higher than the current spot price. As such, large manufacturers, such as Alstyle, have had to navigate through this issue over the past quarter or so. We expect this to continue until the current lower priced cotton makes its way through our finished goods inventory.
“In addition, pricing in the marketplace has not been consistent with these higher costs, thus putting additional pressures on apparel margins. Products are being sold in the marketplace at prices, in certain circumstances, less than the associated raw material costs.
“Our philosophy has always been to try to at least cover our costs in our pricing. Consequently, we feel this has and will impact our apparel sales in the short-term. Therefore, while fiscal year 2012 was challenging, we view fiscal year 2013 to be equally challenging, due to the high priced cotton overhang in inventories and current market pricing on the sell side.
“We do feel that our new manufacturing facility in Agua Prieta, Mexico, coupled with our strong balance sheet and our print operations, places us in a better position than most to weather the storm. While the short-term landscape for apparel appears somewhat challenged, the two Print acquisitions will help offset those challenges from an earnings and sales perspective in the next year.
“We feel good about the long-term prospects of both sectors and as such our Board approved an increase in our share buy-back program and recently announced a 13% increase in our quarterly dividend amount. No matter what directions fiscal year 2013 takes, you can be assured that we will remain vigilant to the task at hand.”
Ennis, Inc. is primarily engaged in the production of and sale of business forms, apparel and other business products.
Ennis, Inc
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