PLUMA, INC.

PLUMA, INC.

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Company Overview
Pluma Inc. is a publicly quoted company which is engaged in the manufacture and distribution of fleece and jersey activewear. The registered business office of the company is located in Eden, North Carolina.
Pluma primarily produces heavyweight, fuller cut fleece products, and fleecewear. The company sells its product to wholesale distributors, screenprinters, as well as to embroiderers. Its products are marketed under the following brand names: Pluma, Santee and Snowbank.
Pluma’s operational facilities are principally located in United States. The company has a joint venture sewing operation in Aguascalientes, Mexico. It has an annual estimated operating revenue/turnover of approximately $187 million.
Business Summary
Pluma Inc. is a vertically integrated manufacturer and distributor of high quality fleece and jersey activewear. The Company is focused on increasing sales and profitability by offering high value products to a diverse customer base. Pluma sells its products to companies such as Adidas, Starter and Walt Disney. In addition, the Company sells products under its own PLUMA, SANTEE, and SNOWBANK brand names to retail and wholesale customers such as Sam’s Club and Alpha Shirt Company. Stardust has been in operation since 1988 and served approximately 6000 customers in the apparel industry in 1998. Stardust’s products include jersey and fleece products as well as golf shirts, jackets and headwear. Its primary customers include smaller screenprinters and embroiderers, retailers and advertising specialists.
Description and history
Pluma Inc. is a vertically integrated manufacturer and distributor of high quality fleece and jersey activewear. The Company is focused on increasing sales and profitability by offering high value products to a diverse customer base. Also in 1998, Pluma operated two nationally recognized wholesale distributors, Stardust Corporation in Verona, Wisconsin and Frank L. Robinson Company (FLR) in Los Angeles, California. These distributors were acquired in December 1997. Although the Company has elected to close FLR in an effort to reduce overhead, it continues to operate Stardust and believes that Stardust is strategically important to the distribution of Pluma’s SANTEE branded products and allows the Company to serve smaller customers who would otherwise prove more difficult to service efficiently. Pluma sells its products to companies such as Adidas, Starter and Walt Disney. In addition, the Company sells products under its own PLUMA, SANTEE,and SNOWBANK brand names to retail and wholesale customers such as Sam’s Club and Alpha Shirt Company. The Company had revenues of $187.3 million in 1998 compared to $134.6 million in 1997.

Stardust has been in operation since 1988 and served approximately 6000 customers in the apparel industry in 1998. Stardust’s products include jersey and fleece products as well as golf shirts, jackets and headwear. Its primary customers include smaller screenprinters and embroiderers, retailers and advertising specialists, customers who otherwise would be inaccessible to the Company as the result of financial inefficiencies that would result from Pluma’s manufacturing division’s attempts to service these customers.

Pluma’s high quality fleece and jersey activewear meet consumer preferences for heavier weights and higher cotton content. The Company’s fleece products include a variety of styles and colors of tops and bottoms in seven and one-half, nine,and eleven ounce weights in cotton/polyester blends ranging from 50% cotton/50% polyester to 100% cotton. Pluma also manufacturers six and seven ounce 100% cotton jersey tops and bottoms designed for outerwear.

Pluma targets a diverse customer base across multiple markets and distribution channels. Currently, Pluma’s material customers include branded customers such as Adidas, Reebok and Starter, retailers such as Miller’s Outpost and Sam’s Club and entertainment customers such as Hard Rock Cafe and Walt Disney. In addition, Pluma sells to wholesale distributors, screenprinters and embroiderers who sell the Company’s products to a wide variety of retailers, ranging from small souvenir and resort stores to large nationwide department stores. The Company’s diverse customer base provides product exposure to many consumer markets and enables Pluma to balance its production more evenly throughout the year.

During 1998, 1997 and 1996, Pluma’s top ten customers accounted for 47.9%, 80.2% and 75.5%, respectively, of the Company’s net sales. During 1998, the Company’s top three customers, Sam’s Club, Adidas and Starter Galt, accounted for 25.7%, 9.4% and 2.5%, respectively, of the Company’s net sales. During 1997, the Company’s top three customers, Sam’s Club, Adidas and FLR accounted for 31.1%, 12% and 8.7% respectively of the Company’s net sales. During 1996, the Company’s top three customers, Sam’s Club, Adidas and Frank L. Robinson, accounted for 24.1%, 14.7% and 7.2%, respectively, of the Company’s net sales. Pluma provides products to its customers pursuant to purchase orders on an as-needed basis.

Branded

Branded accounts consist of customers such as Adidas, Bike and Reebok. These accounts require the manufacturer to meet exact specifications, such as styling, color, screenprinting and embroidery. Products are labeled, packaged and shipped ready for sale to consumers.The Company’s ability to accommodate the specialized nature of products manufactured for these customers often results in higher margins. Branded accounts constituted approximately 12.2% of the Company’s net sales in 1998, 23% of the Company’s net sales in 1997 and 20.6% in 1996.

Retailers

Retail customers include specialty, high-end and value-oriented retailers. The Company’s largest retail customer in 1998 was Sam’s Club, which markets and sells Pluma labeled products. Pluma’s other retail customers include Miller’s Outpost, which sells its own private label products manufactured by Pluma or products with Pluma’s SANTEE label. The Company believes that this market segment holds significant opportunity for growth as other value-oriented retail formats continue to grow in popularity. Retail customers constituted approximately 28% of the Company’s net sales in 1998, and 40.9% and 33.7% for the same periods in 1997 and 1996, respectively.As a result of the growth of the Company’s business with Sam’s Club, coupled with increased consumer recognition of the Pluma brand name, the Company has granted a license to Kayser Roth Corporation that allows it to manufacture and distribute socks to Sam’s Club under the Pluma brand name.

Screenprinters and Embroiderers

Screenprinters and embroiderers include Endless Design, Artisans and SouthPrint among others. These customers typically purchase basic products to which they add design and logos. They then resell these products to a wide variety of retailers, ranging from small souvenir and resort stores to large, nationwide department stores. Certain screenprinters and embroiderers resell under Pluma’s SANTEE label. Screenprinters and embroiderers constituted approximately 7.9% of the Company’s net sales in 1998, and 11.3% and 19.7% for the same periods in 1997 and 1996, respectively.

Wholesale Distributors

Wholesale distributors include T-C Distributors and Laurel Run.These customers generally purchase goods in large volume for further distribution to companies such as Converse, as well as to small customers, which are typically more difficult for the Company to service. All products sold to these customers contain Pluma’s SANTEE label, which is becoming more recognizable by consumers. Wholesale distributors (exclusive of Stardust and FLR in 1998) constituted approximately 2% of the Company’s net sales in 1998, and 16.7% and 17.5% for the same periods in 1997 and 1996, respectively. Wholesale distributor sales were less during 1998 than in prior years as the result of the acquisition of Stardust and FLR, which were large customers of Pluma before their acquisition.

Entertainment

Entertainment accounts consist of customers such as Hard Rock Cafe and Walt Disney. This market segment demands a basic product on which designs are printed or embroidered for souvenir sales.Demand for goods sold to this market segment is relatively consistent throughout the year. Entertainment accounts constituted approximately 3% of the Company’s net sales in 1998, and 8.1% and 8.4% for the same periods in 1997 and 1996, respectively.

Stardust and FLR

Stardust and FLR accounted for approximately 45% of the Company’s net sales in 1998. Stardust sells approximately one-third of its products to screenprinters and embroiderers, one-third to retailers and the remaining one-third to advertising specialists, Stardust’s fastest growing customer segment. Pluma has closed FLR and is in the process of liquidating a substantial portion of its inventory. Historically, approximately 2% of Pluma’s sales consisted of irregular products sold by the Company and independent sellers.

The fleece and jersey activewear industry is highly competitive. Pluma’s major competitors are vertically integrated manufacturers such as Fruit of the Loom, Inc., Russell Corporation,Tultex Corporation and VF Corporation. Certain of these competitors have greater financial resources and larger manufacturing, distribution and marketing capabilities than the Company; however, no single manufacturer dominates the industry. Among other factors, the Company’s future success will depend to a significant extent upon its ability to remain competitive in the areas of price, quality, marketing, product development, manufacturing capabilities, distribution and order processing, which are the principal methods of competing within the fleece and jersey apparel industry.

Business Line
Engaged in the manufacture and distribution of fleece and jersey activewear
Subsidiary

Advisor
DELOITTE & TOUCHE LLP
IPO date
3/1997
US SIC Code
2253
Company Address
801, Fieldcrest Road

City province or state postal code
27288, EDEN, NC
Phone: +1 540 635 4000
Fax:
Country address: UNITED STATES OF AMERICA
Website url:

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