Blog: Sara Lee shocker
Leonie Barrie | 11 June 2004
Does Sara Lee’s shock decision to cut around 4,175 jobs and close five production plants mark the beginning of the end for the company in the apparel business? Feedback from several analysts seems to suggest that it will at the very least give the largest US underwear maker breathing space to consider its position in this sector – the company’s largest business unit accounting for a third of sales, but also the most disappointing in terms of profits (which dropped 23 per cent in the third quarter).
Another question is whether we should really be all that surprised? Sara Lee’s actions are hinged very clearly on imminent quota-free trade in the textile and clothing industry – and could well be a foretaste of what’s to come as companies in the western hemisphere try to compete with cheaper products from China and other low-wage countries. Sara Lee has been offloading companies for the past couple of years in an attempt to boost profit, but with a business that focuses on low profit margin basic commodities like T-shirts and underwear it needs to do as much as possible to cut production costs. Even though it denies it is intending to move its manufacturing to other countries, its search for a balance between price and speed of delivery and production may well take it down this route.
It’ll all add fuel to the fire that’s smouldering away within the Istanbul declaration – the members of which are planning a Summit in Brussels next week to discuss their next plan of action.
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