Blog: Leonie BarrieThe week that was...

Leonie Barrie | 29 September 2008

Underwear and T-shirt maker Hanesbrands is nearing the end of a restructuring which began when it was spun off from Sara Lee Corp three years ago. But that doesn’t lessen the shock value of its latest decision to close nine plants in five western hemisphere countries and axe 8,100 jobs as it consolidates production into fewer and bigger facilities in Asia and Central America.

That’s about 16% of the 50,000 strong workforce at the company whose brands include Champion, Wonderbra, Playtex and Bali.

The latest supply chain streamlining – which is part of a long-term plan to cut costs – is due to be completed by the end of summer 2009. It will also mark the end of the company's large knit-fabric textile production in the United States.

Since September 2006, Hanesbrands has brought the axe down on at least 28 plants worldwide employing around 16,300 workers. 

Belgian denim major Uco Sportswear has also decided its manufacturing unit in Ghent is no longer viable, and is to shut the plant with the loss of 379 jobs. Production will be transferred to the Uco textile mill in Giurgiu in Romania, where the annual cost of workers is one tenth of that in Belgium. The Romanian plant is also seen as key to making the company more competitive against nearby manufacturers in Turkey, as well as strengthening its position in Europe's high-volume mid-markets.

The viability of one of the UK’s most popular sports retailers was called into question on Friday after auditors to JJB Sports warned that the company could go under after breaching a banking covenant. Compounding worries was the retailer’s unexpected slump to a GBP9.7m half-year loss from a profit of GBP8.3m a year earlier. Sales were down 5.6% to GBP344.7m. JJB also took the surprise step of scrapping its first-half dividend.

Its fortunes compare markedly with those of rival retailer JD Sports, which earlier in the week posted a 54% jump in pre-tax profits to GBP12.4m with like-for-like sales up 5.8%.

Strong US sales and a 3% rise in future orders have helped Nike Inc beat Wall Street expectations, even though a one-time tax benefit last year meant first quarter profits fell 10%. Revenues grew 17% to $5.4bn, with all geographical areas registering growth, including the beleaguered US market. Results have been helped by the Beijing Olympics, which helped raise brand awareness and product innovation.

US specialty clothing retailer Gap Inc has also set its sights on the women's sports and active wear sector after buying apparel company Athleta Inc for $150m in cash. Athleta will become the "fifth tab" on Gap's online platform, selling alongside the Gap, Banana Republic, Old Navy and Piperlime brands. The deal will give Gap a foothold in the $31bn women's active apparel sector in the US, allowing it to tap into popular activities such as yoga and pilates where customers demand stylish yet functional clothing.

 


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