Katrina Crushing Business

New York - In the days since Hurricane Katrina tore through South Florida and portions of the Gulf Coast states, the home textiles industry has worked to cope with its effects on both people and business.

Costa Mesa, Calif.-based Anna's Linens, which had to close 12 units in New Orleans, Biloxi, Miss. and Mobile, Ala., still had not accounted for all of its 100 associates in the region at press time.

"We are still waiting to hear about them, and that's the most important thing to us right now," said Alan Gladstone, president, CEO and chairman.

In the meantime,mounting crises are taking a toll on the total industry and creating some major headaches and concerns.

The market is feeling the brunt of a surge in oil prices, caused by Katrina's impact on refineries in Louisiana. Harmful weather and power outages have forced many retailers, like Anna's, Wal-Mart, Home Depot and Fred's, to shut down dozens of regional units. Flooded and obstructed roadways combined with high gas prices are causing trucking delays, leaving truckloads of goods on hold or stuck between destinations. And pricing pressures are compounding the pain for the industry.

Taking a firm position on pricing is Dalton, Ga.-based Shaw Living, a major producer and supplier of synthetic area, accent and bath rugs.

"The rising cost of oil continues to negatively impact operating margins," said Jeff Meadows, division vice president. "We have seen the price double over the past five quarters. We must pass these costs along to our customers, as they have become too much to absorb."

Gladstone said Anna's Linens does not expect to see "any inflation in this industry. We are keeping our prices the same." But he warned should gas prices soon hit $4 per gallon at the pump, "forget Anna's and the home textiles industry. The whole country will have a major problem on its hands."

Sympathetic to both sides is Kea Capel Meachum, business and brand manager for High Point, N.C.-based Bacova Guild and sister company, Gulistan Carpets Inc.

"We got many container loads of goods coming now, including polypropylene and nylon area rugs, and we're in no position to pass along a cost increase to retailers, and retailers are in no position to accept one," she said.

Many are still apprehensive about addressing the topic of product price increases.

"I simply just don't know what will happen or what we'll do," explained Wade Maples, president and owner of Scottsboro, Ala.-based Maples Industries. About 80 percent of the company's offerings comprise synthetic area, accent and bath rugs. "The sudden surge in oil prices has definitely come as a surprise, and all we can do right now is deal with it as it unfolds."

Similarly, Sugar Valley, Ga.-based Mohawk Home, also predominantly synthetic in its offerings, said it is still studying what to do about pricing. "We continue to evaluate the ever-increasing cost pressures from raw materials as well as the transportation costs throughout the entire supply chain," said Jim Quist, vice president, sales.

Oil-based product price increases are still "manageable" for Carson, Calif.-based Brentwood Originals, a supplier of decorative pillows. Loren Sweet, president, said all of its pillows contain polyester filling, "which is going up (in price) continuously." He said that if Brentwood is forced to raise its own prices as a result, "it will depend on demand. But ultimately, it will have to happen."

Barry Leonard, president and CEO of Glenoit Universal, said oil-based products - such as shower curtains - make up a major part of his business.

"We are still debating how to handle (price increases)," he said. He added that oil prices - which rose by 65 percent prior to Katrina - have already "significantly impacted" his business.

Glenoit, based in Tarboro, N.C., is just one of many home textiles companies with facilities in the South that are bracing for tougher times ahead.

Gov. Mike Easley of North Carolina last Thursday issued a statement urging people of his state to conserve gasoline. Easley said 90 percent of North Carolina's gas supply came from two major pipelines that have been shut down by Katrina. "We do not know the extent of the problem, but we do know that there will be a significant loss of gasoline in the Southeast," he said.

Easley described the problem as not only North Carolina's but also one for the region and the nation. He asked that the entire region, which is home to several companies like Springs Industries, WestPoint Stevens, Croscill Home and Capel Inc., take every measure to conserve energy.

Many store closings - both short - and long-term - are already heavily impacting retail. Wal-Mart shut down more than 80 units and at least one distribution center in the region due to power outages and flooding. It sent e-mails to vendors asking them to withhold shipments to these stores until further notice.

Home Depot also closed several units but announced last Wednesday that is would begin opening stores on the periphery in the coming weeks and months and would also relocate thousands of its workers to the Gulf Coast States to provide additional support to affected stores and communities.

Fred's, too, said more than 180 units in the region were affected and about 90 stores were shut down as of last Tuesday evening.

Gladstone said when Katrina struck South Florida, Anna's was forced to close 12 units for three consecutive days and postpone the grand opening of a new unit in Miami's Hialeah Gardens neighborhood until Sept. 15. His outlook for stores in the Gulf Coast is bleak, since eight of 12 closed stores will be unable to reopen until sometime next year.

"The damage was so bad that it's beyond words," Gladstone explained. The other four stores are expected to be back in operation in the coming week or so, he said.