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U.S. Apparel Makers Can Be Successful

May 21, 1986

NEW YORK (AP) _ While its import-battered competitors close plants, move operations abroad or seek relief in mergers or buyouts, the experience of one American apparel maker stands in vivid contrast.

Its performance also raises questions not easily answered by advocates of import restrictions to protect American industry.

The company - VF Corporation - is a standout, not just against weakened competitors, but when matched against America’s most powerful companies. Nine straight years of record profits have led to three 2-for-1 stock splits since 1982.

Since 1980, its stock has climbed more than 13 times on a split-adjusted basis, from a low of $2.37 to a high of around $32. It continually ranks in the top 10 percent of the Fortune 500 for long-term growth and shareholder return.

The Wyomissing, Pa. company makes and sells almost all its goods in the United States rather than abroad. In an unstable industry, it hasn’t had a strike in memory. It promotes from within, and its employees stay with it for decades.

In spite of its success - it is the biggest publicly owned U.S. apparel concern - VF is sometimes overlooked. The price-earnings ratio of its stock, at 12, is below the market average. And in a recognition study among Wall Street Journal readers it ranked last among textile-apparel makers.

Quietly, steadily, conservatively it goes about its business while others fail or are restructured.

In 1985, Levi Strauss, Blue Bell, and Palm Beach went private in leveraged buyouts. Cluett Peabody, West Point Pepperell, Springs Industries, Fieldcrest, M. Lowenstein, Cannon, and Avondale mills have planned or completed mergers.

Even General Mills and Gulf & Western, which have demonstrated management abilities in other industries, decided to sell off their apparel units.

Asked to explain the difference, chairman Lawrence R. Pugh, who assumed the reins in 1983 after the death of VF’s long-time leader, Manford ″Whitey″ Lee, stated simply, ″management.″

Good management, he says, is a tradition at VF, formed in 1969 through a merger of H.D. Lee Co. and Vanity Fair Mills. ″We are conservative in finance and how we operate the business. We stay away from fashions; we stick religiously to a basic apparel-basic fashion philosophy.″

In doing so, he explains, the company’s business remains stable in good times and bad, and avoids rapid shifts of the high-fashion market which can abruptly ruin a company that two years earlier was riding high.

This stability, he continued, ″gives VF time to engineer quality up and costs down.″ It permits the company to keep good people. And in keeping to basics rather than high fashion it keeps its labor costs low.

″People, people, people,″ Pugh says. ″Our managers recognize they must have a relationship with workers and listen to what happens in the plant and react to it. We try to sit down and talk with our people and see how we can make their jobs better and enable them to earn more money.″

Inventory control is ″a passion.″ VF keeps inventories tight; importers and foreign companies frequently are left holding huge supplies of goods when their markets, particularly high fashion, suddenly change.

Segmention, or differentiation of products by sex and age group, is important, Pugh says. Women do not like to wear jeans manufactured for a man’s body. Unisex is old-fashioned; women want a good fit.

VF stresses brand development. Some people might not recognize the company name, but they know the brands: Lee jeans, Vanity Fair intimate apparel, Modern Globe underwear, Troutman men’s slacks, Bassett-Walker jogging and sweat suits.

The latter are called fleece goods, and Pugh believes they will be ″around forever.″ Clearly, he says, they have caught on among all age groups as casual wear, rather than being restricted to their role in athletics.

Pugh, 53, and VF president Robert Gregory view marketing as one of their contributions to an already well-managed company. Markets are not growing strongly today, says Pugh, so a successful company must take another’s share of the market.

In an effort to broaden product distribution they recently signed licensing agreements with Pepsi Cola to produce a broad line of casual apparel with the Pepsi logo on each item, and with Nike, Inc., to produce fleecewear.

Viewing VF’s success, securities analysts and others have begun to wonder if it is really so - that American companies cannot compete with imports.

End Adv PMs Wed May 21

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