NEW YORK — The news this week of Sara Lee Corp.’s massive restructuring program was met by others in the sheer hosiery industry with concern for it may portend for the industry’s future — but no surprise.
Industry executives recognized the move as a dramatic result of the pains the entire industry has been feeling for two years.
As reported, in a consolidation aimed primarily to cut production in its lagging U.S. and European hosiery and fleecewear businesses, Sara Lee will close some facilities and eliminate 8,000 to 9,000 jobs, or 6 percent of its work force. The plan will result in a $495 million charge after taxes against earnings.
In hosiery, this will mean a 5 percent cutback in U.S. production and a 5 to 10 percent cutback in Europe, the company said.
The restructuring announcement followed a spate of downbeat hosiery news from Sara Lee, the largest hosiery maker in the U.S.; in its annual report for fiscal 1993 it claimed a 44 percent share of the country’s $2.4 billion sheer hosiery market. In that report, the firm also noted its worldwide sheer hosiery volume fell 4 percent. In its latest report for the nine months ended April 2, the firm said sheer hosiery volume dropped 5 percent. In July 1993, the company announced that it was closing two of its sheer hosiery plants and consolidating those operations in a third plant.
In the latest moves, Sara Lee Hosiery plans to close still another plant and a distribution center, as well as consolidating some other operations. Adams Millis, a Sara Lee operation that makes socks, will also close a knitting plant and a finishing operation.
“Sara Lee’s restructuring relates to the drastic changes we’ve seen in the market with the decline in sheer hosiery business,” said Gary Malloch, president of Kayser-Roth Corp., the second-largest manufacturer of sheer hosiery in the U.S. “We recognized these changes earlier and decided to restructure. We thought it was necessary to bring the business in line with market conditions.”
Early this year, Kayser-Roth itself was sold to the Mexican hosiery firm Grupo Synkro.
Howard Hyde, vice president of worldwide marketing and sales for Pennaco Hosiery, a subsidiary of Danskin Inc., expressed discomfort over the Sara Lee move.
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“Sara Lee is the pinnacle of our industry,” said Hyde. “When they hiccup, we feel the effects.” He noted that if the company tries to get rid of massive inventory with sales, it will affect department store business for other vendors.
“Sheer business continues to be difficult,” he said. “We have to work for every sale.”
“While sheer hosiery may be stronger than it has been for fall with the return of feminine dressing, it will never be as strong as it used to be,” said Hyde. He attributes the shift to casual trends in dressing that he feels are here to stay, such as “casual Fridays” in the workplace.
Some feel problems at Sara Lee — whose hosiery strength is in such brands as Hanes, the licensed Donna Karan and Liz Claiborne lines and the mass-merchandised L’eggs — also reflect a trend to more private label among retail accounts.
“The general trend these days is moving away from branded labels and toward private label and specialty items,” said Fritz Schulte, president of Hampshire Hosiery Inc. Until recently, Hampshire held the license to Christian Dior Hosiery, which it gave up to focus exclusively on private label hosiery, leading to a consolidation of its operations.
“From a retailer’s point of view, too many stores carry the same brands, and margins are greater with private label,” Schulte said. “As we found with the Christian Dior business, it requires tremendous financial resources to support brands”
“Many manufacturers are experiencing the same things in this difficult market, but Sara Lee, as a larger company, is affected on a much larger scale,” he said. “Sara Lee just needs to weather the cycle. I think that the demand for branded goods will come back once the competition dies down.”
From a retail fashion point of view, there is some optimism for sheer hosiery. Benny Lin, fashion director of Macy’s East, said: “The return of the suit and jacket and high heels will help the sheer hosiery business this fall. Over the past two years, we’ve seen a lot of soft, unconstructed fashions, along with heavier footwear that calls for tights and socks.”
Sid Smith, president of the National Association of Hosiery Manufacturers in Charlotte, N.C., said that based on the assessments from Sara Lee chairman John H. Bryan, the moves were being made to create “a stronger, more aggressive company” and follow a heavy period of acquisitions.
“These things happen to all companies,” said Smith. “Corporate corrections are positive management moves.”