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News Flash
Ennis' net earnings impacted by lower apparel sales
20 Dec '11
4 min read
As we have been discussing in previous statements, key apparel manufacturers have been and will be dealing with significantly higher input costs for the foreseeable future. While the spot price of cotton has dropped significantly over the past quarter, this, unfortunately, does not represent the cost of cotton in most large apparel manufacturers' finished goods inventory.
Most large apparel manufacturers lock in cotton contracts in order to guarantee an uninterrupted supply of cotton and price stability. Unfortunately, these locked in contract prices are now significantly higher than the current spot price.
With the recent influx of cotton supply from India and other global impacts which soften cotton demand, many of the smaller manufacturers who didn't have the financial capacity to enter into longer term contracts are now able to compete on a favorable basis.
We view this as a short term event. The larger manufacturers, such as Alstyle, will have to navigate through this issue over the next few quarters, until the lower cotton pricing makes its way into their finished goods inventory.
The new manufacturing facility in Agua Prieta, Mexico is fully operational. We are pleased with the results and the status of its production levels. The results are in-line with our expectations at this point, but we would expect continued improved efficiencies in the coming quarters. Many challenges have been negotiated to date, but uncertainties continue to mark the short term landscape. 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. The Company is one of the largest private-label printed business product suppliers in the United States.
Most large apparel manufacturers lock in cotton contracts in order to guarantee an uninterrupted supply of cotton and price stability. Unfortunately, these locked in contract prices are now significantly higher than the current spot price.
With the recent influx of cotton supply from India and other global impacts which soften cotton demand, many of the smaller manufacturers who didn't have the financial capacity to enter into longer term contracts are now able to compete on a favorable basis.
We view this as a short term event. The larger manufacturers, such as Alstyle, will have to navigate through this issue over the next few quarters, until the lower cotton pricing makes its way into their finished goods inventory.
The new manufacturing facility in Agua Prieta, Mexico is fully operational. We are pleased with the results and the status of its production levels. The results are in-line with our expectations at this point, but we would expect continued improved efficiencies in the coming quarters. Many challenges have been negotiated to date, but uncertainties continue to mark the short term landscape. 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. The Company is one of the largest private-label printed business product suppliers in the United States.
Ennis Inc
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