Tales Of A Fourth Generation Textile Executive: Speechless

Not so happy Monday folks.  Today I am taking a break from being happy boring Scott.  It is not by choice, but rather out of circumstance, so hopefully you will understand and can make an exception this one time. Last week’s trip unfortunately didn’t turn out as planned.  A little wrench was thrown at me when my uncle (Michael Brod) finally passed away from brain cancer.  I knew it was coming (as did my loyal blog reader’s), but who is kidding who, one is never fully prepared for the death of a loved one.

The thing is that for me (excluding my grandparents), this is the first death that has rattled me to my core and really hit home.  I mean seriously, I am an emotional wreck every time I think about Unc or Uncsy as we liked to call him.  All the memories.  All the love.  And now the void. I am totally speechless.

Tales Of A Fourth Generation Textile Executive: Camp Update & Mergers & Acquisitions Discussed

So, my son finally left for camp with a huge smile on his face despite all the tears emanating from the rest of us.  He was so brave!  And notice how I use the word finally.  It was time for him to go.  He went.  The rest is history and now I feel a lot lighter with this weight off me.  Now, let’s pray together for 46 1/2 more days of smooth sailing.  Next subject!

Over the 87 years of being in business, Jaftex has had nearly 20 companies under its umbrella and almost all of the companies were purchased from someone else. I wanted to discuss the manner in which most of these companies were acquired because I thought it would be interesting for you to learn.  But also, I think we are on the precipice of a lot of M&A activity about to occur in our industry.  Yes, this is me predicting the future without any inside scoop.  The reason being is that companies can gain more efficiencies by purchasing others. Basically, the total sales volume can increase and the overhead (expenses) on the combined company can decrease due to redundancies and other cost cutting measures.   For example, you don’t need 2 book keepers, secretaries, offices, warehouses, etc.  There is also purchasing power when you buy more stuff, so that too can result in lower costs and higher profits.

Many of the companies that we purchased had been struggling before we purchased them. In most cases, the owners were very relieved to have the life line.  Typically, the purchases were inventory based. Essentially, we and the seller evaluated the inventory and valued it based on the original costs and age of the fabric. This is a simplistic description as other factors did play in to it, but I don’t want to bore you with the minutiae.  We then buy the fabric.  In addition, we take on all the essential employees that we need to maintain the continuity of the business.  We also take on a portion (or all) of the obligations that exist including the sales.  So maybe we take on paying the insurance for the employees, but not the rent for the office since we don’t need the space anymore.  We like to think that we can be value-added to the company and turn it around by implementing methods and processes that have worked for us so well over the years.   It usually takes a year or so for us to get the company running on all cylinders.   We have been fortunate to mostly have asset purchase deals, but not all deals are the same.

Not all companies are purchased while they are in trouble.  Some are purchased at a time when the company is doing great and we wouldn’t be afraid to pay up for the right company if the opportunity arose.  In this case, the owner may want to sell out because he or she wants to retire, go in to another business, try to get out of the business at the top and/or maximize profits and the list goes on.  In this scenario, a simple inventory purchase won’t work.  This person is thinking, show me the money!  The owner will want money for his or her good will, the brand name, future booked sales, websites and so many other things that took him or her time to build and perfect.   The buyer may want a multiple of earnings.  For example if the company earned $1 million last year, they may want to be bought for $5 million plus the cost of the inventory.  That would be 5 times earnings and the buyer would be paying up.

The thing is, what multiple would you use to evaluate a textile company?   It isn’t a biotech company or tech company where the multiples could be 15% or even higher based on the huge growth potential.  Dream on if you think you are getting 15% or even 5% in the textile industry.  For this industry, I would say low single digits would be more reasonable.

It’s not like it isn’t easy to go out and start up your own fabric company. There are so few barriers to entry.  Case in point, Sue & John Linam, formerly of Fabric-Quilt, are now starting a brand new fabric business.  So why would someone pay a double-digit multiple?  If you are thinking about selling and are fantasizing about double-digit multiples, I would start thinking again and fast because it isn’t going to happen.  Once you start merger and acquisition discussions, you will learn very fast what someone is willing to pay and I would guess that the number is under 5%.

Hopefully one of these days I will have a new deal to report to you about. In the meantime, let’s see if my prediction about M&A comes to fruition.

Happy Summer Scott

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Tales Of A Fourth Generation Textile Executive: The Proverbial Race To The Bottom

One thing that was very clear at market and something that I have been talking about a lot lately is that competition is fiercer than ever. Everyone, including me, is fighting for customer dollars in order to be one of the survivors. This is our livelihood and why wouldn’t we fight the fight to be king of the mountain or at least be on the mountain and not in the swamp below. With that, I have come to recognize that we are in a race to the bottom that is not healthy for our industry or any industry for that matter. Do you know what I mean by the race to the bottom?

As the overhead of the business equation goes up because that is what it probably does every year (higher rent, higher wages, inflation, insurance and the list goes on), the profit margin side of the equation goes down due to decisions being made to compete.

For example, a simple race to the bottom is that the yardage on a bolt in lots of cases is getting smaller or requests are being made for them to be smaller.  The majority of fabric re-sellers want smaller bolts so they can turn the fabric faster, make smaller investments, take less risk, have more variety and so on. Some vendors are doing this and competing in the race to the bottom.  Others are holding strong whereby they will only go as low as a 10 or 12 yard bolt.

All things being equal, the shorter bolts wouldn’t be the end of the world, but for these facts.  Shorter bolts mean less efficient cutting due to the constant changing of the board for the next piece, it means more boards, it means fewer bolts fit in a box due to the fact that more boards take more space and it takes up more real estate on warehouse shelves.   Guess what this all means folks?  Yes, there are increased costs associated with the shorter bolts.  So now, not only are you selling fewer yards, but the costs to make that smaller bolt are increased too.  So this is at a minimum a double whammy if not triple or quadruple whammy.  Lower margin-ville here we come.  Oh, stop the sarcasm Scott!  You are winning the race to the bottom.  I said stop the sarcasm Scott!  Not a race I want to be winning nor should you want it either.  Please resist because once you do this, there is no going back to how it used to be.

Another example is how buyers are always pushing for lower pricing. Of course, it is their job to get the best prices possible, so why not try? Anyway, I inevitably hear the buyer say that other vendors are lower priced than I am.  Obviously, that is sucky and no one ever wants to hear that.  The thing is that I never know if they are telling the truth or just pushing my buttons.  But they are saying it and getting in my head, so I have to deal with it anyway, otherwise someone else is going to keep eating my lunch so to speak. Assuming they are telling the truth and being that I have a pretty good handle on my fabric costs, I know where I need to draw the line.  At some point it just doesn’t work for me and my business.  I sell fabric to make a profit, not a loss.  Why would someone do that?   Because they want to be the winner of the race to the bottom.  I know, I am sorry, I have to tone down the sarcasm and be happy boring Scott.  I am smiling though.  I digress.

I am sure that you can come up with many more examples of the race to the bottom unfortunately.  But, in short, the winners of the race to the bottom will probably go out of business sometime soon because they are selling too cheaply and that is no way to be successful.  Be careful folks. Use discipline and make sure you know what margins you need to make to add to your bottom line and not detract.  Don’t say I didn’t warn you.

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Tales Of A Fourth Generation Textile Executive: What Is The Future Of Our Fabric Industry?

Two weeks ago, I talked about the knowledge I gained at quilt market and this week I wanted to continue discussing the buzz at the show. I am still angry that I can’t write angry blogs.  Am I allowed to still be angry about not being able to write angry blogs?  This is harder than I thought.

Ok, let me get happy boring Scott back.  One second, here he comes.  So back to quilt market.  I am amazed about how fast the world is changing. It is just astonishing and a little scary to be honest.  Well, a lot scary.  So many conversations at market were about what would bring future success when it comes to the fabric business.  Was it digital printing? Technology? Online sales?  Direct to consumer?  Stay the course?  Too bad that no one has a clue at this point, but it looks like the Amazon effect is kicking in allover the place and freaking everyone out.  Will the world ever be the same again?  Not a chance!  Sounds like a good time to retire if you ask me, but unfortunately I am a little young for that.

If I could only see where our business would be in 5 or 10 years, it would be so helpful. LOL.  Will we be in business still?  I must say that the odds are in our favor that Jaftex will be in business since we reached the 4th generation for which the odds of that are less than 1% and that’s a fact.  In any case, I sure hope so, unless we sell out for 100 billion dollars or something close to that.  You are supposed to laugh for, with or at happy boring Scott.  Will we have more companies under the Jaftex umbrella? Will we make it to the 5th generation?  Will the kids (5th Generation) want to work in fabric when it’s not sexy like working at a start up?

What’s the future of the industry?  I wish I knew.  I typically like to make suggestions on my blogs and I am almost always right…oh relax, I am kidding.  Don’t forget that this is happy Scott and all is good in the hood, all the time and everywhere….so get used to it.  I just don’t think I can make that prediction yet.  I need more time.  The future is still unclear, but as soon as it becomes clearer to me, I will be sure to let you know.  If you know or think you know, please share.  It will be insightful to hear where you think this industry will be….I was going to say in 5 or 10 years, but I think I need to be more concerned with the next 5-10 hours.

Have a great week folks!

 

Tales Of A Fourth Generation Textile Executive: The Yenta Is Baaaaack!

Happy Monday Yentees,

The Yenta is back with another installment of news a.k.a. gossip.  Like I mentioned last time, I don’t really consider it to be gossip since it really is all fact in spite of what some want to believe.  The only thing is that it might be gossip to you since you haven’t heard it until now.  Before I get in to the heart of the Yenta for this week, I wanted to clarify one thing from the first Yenta installment.  Regarding the contraction that I predicted in the fabric industry, you should know that the contraction will affect everyone including my companies too. Unfortunately, no one is immune.  So in spite of what some might have thought I said, the contraction is hitting everyone, but it just hits everyone differently….some worse than others.

Anyway, last week I discussed the unfortunate demise of a couple companies/divisions to the benefit of the rest of the industry, but this week I am discussing the combination (mergers & acquisitions) of others. I have two to discuss:

  1. This is old news by now, but news nonetheless.  On or around the time of the 2016 October Quilt Market, Wyndham bought Anthology Fabrics.
  2. Just this past week, it was announced that the distributor, Troy Corporation, out of Chicago, Illinois was purchased by a company that I had never heard of before, Midwest Embroidery Supplies out of Farmington, Missouri.  I look forward to meeting the new owners and working closely with them as we have had a longstanding and fantastic relationship with the Troy’s.

Congratulations to all companies involved with these deals.  Good luck!

My brief comments on the M&A are this.  The Wyndham deal is a good one for our industry as it combines two entities that can now benefit from the synergies of being one combined entity.  More  deals like this would be welcomed in our industry as far as I am concerned.  It would also help to reduce the number of suppliers as there is just an overabundance.  On the other hand, the Troy/Midwest deal doesn’t really have any major benefit to the future of our industry because it really just keeps Troy in the game under a new owner who isn’t a big player in fabric at all.  That being said, it is probably a good deal for Troy, but it doesn’t help the other fabric distributors or convertors who are dealing with the contraction.

Mary Jo Cloninger of Mary Jo’s Cloth Shop.

I unfortunately have some very sad news to report.  This past Friday I got an email informing me that Mary Jo Cloninger of Mary Jo’s Cloth Store in Gastonia, North Carolina passed away at 85 years old.  Since I go down to the Carolina’s most frequently on business, I often had the opportunity to work with Mary Jo on various occasions.  The one thing I would never forget about Mary Jo was how she would always insist on 20-25 yard bolts.  She would always say anything less than that is a remnant.  She was always shocked to hear that the chain stores were taking 8 yard bolts. Anyway, the fabric industry is losing a true gem.  Rest in peace Mary Jo, you will be missed.  My thoughts and prayers go out to your family.

On a lighter note, as a follow up to my previous blog about Monopoly changing their game pieces, it’s official that the thimble, shoe, wheelbarrow and iron are gone.  In is the rubber duck, penguin and Tyrannosaurus rex…really?  They will join the Scottie dog, top hat, cat, race car and battleship.  Next year, we fabric people should vote for the sewing machine.  The Yenta is now out of ammo for the time being.

Until Next Week,

This is Scott Fortunoff the fabric yenta signing off.

PEACE!

 

 

Tales Of A Fourth Generation Textile Executive: Quilt Market Credentials

Dear Quilt Shop Owners & International Fabric Customers,

Happy Monday!  As you may or may not know, ALL quilt market business credentials expired last year.  As such, it is time to resubmit your credentials which will be in effect until December 2019.  I am sure that it is a little bit of a pain to have to submit this, but fortunately this is only necessary to submit every 3 years.  Also, it probably won’t take you more than 5 minutes to collect all the paperwork and submit to the people of Quilts Inc.  If you didn’t receive the email about having to update your market credentials, you can contact the people at Quilts Inc. or you can email me (scott@jaftex.com) and I will forward a copy to you.

We vendors truly need your support by having as many quilt shop owners as possible attend the market.  Don’t forget that we are all in this together. This year the market is in St. Louis which should be a different and new experience as I don’t believe there has been a quilt market there before.  I imagine that most people are excited to be able to explore a new location so that they can enjoy what the city has to offer.  Check out this link to see 25 things to do in St. Louis.

Believe it or not, I am looking forward to the St. Louis market especially as compared to the Houston market.  The Houston market is getting kind of stale and I think most would agree especially being that the place was under construction for the last 2 years.  The problem is that Quilts Inc. has a long term contract with that location and that is also where the Quilts Inc. headquarters is located.  In any case, I am looking forward to the fresh new locale and all that it has to offer.  I am also looking forward to the increased number of school houses that our companies are putting on.  We realize that quilt shop owners put great value on the school houses. As such, we are bringing them.  So please come on down and enjoy!

All that being said, please get your credentials in asap and start putting plans together for what should be an amazing market.  Finally, if you are attending the St. Louis market and want to be eligible to join myself, our stylists, associated licensed designers, other quilt shop owners and sales reps for a dinner on Friday night, please email me at scott@jaftex.com. You must be an existing customer of one or all of the Jaftex Companies to be eligible.  Thank you for your time.  See you in St. Louis!

Have a great week!

St. Louis Scott

Tales Of A Fourth Generation Textile Executive: Sandra Magsamen Books On Steroids Are A Hit!

Happy Monday Friends,

For as long as I can remember, soft fabric books have been a hot selling item for children.  They continue to still be a very hot item today.  Very often when we have a book panel in a line, it is usually the best seller.  In any case, building on the success and popularity of book panels, we at Studioe, in conjunction with Sandra Magsamen, brought you what I look to call “books on steroids.” These are just like the old books, but they have the added bonus (the steroids) of a 3 dimensional appendage on the top i.e. a hat, antlers, ears, etc.

Studioe has had 3 rounds of introductions of these books.  In the first round, we released 5 books.  Here they are below:

 

In the next round, we offered another 5 books.

Finally, just this past October we introduced the first holiday grouping.  Unfortunately I can’t get an image of the cover from the website like the ones above, so I am just going to tell you about the others and you can click on the link if you want to see what it looks like.

  • I Love You Snow Much.  This is a cute story about snowmen and the appendage on the snowman is a knitted winter hat.
  • I Love To Gobble You Up.  This is a Thanksgiving story where the main animal is a turkey and the three dimensional appendages are the tail feathers.
  • Boo Boo I Love You.   Of course, this is the Halloween book.  The special appendage is a black hat on top of the white ghost’s head.
  • Boo To You! & Whoo Loves Halloween? Trick or treating bags.  This is the first foray into something other than a book with Sandra Magsamen.  Here you get 2 different Halloween bags on one 36″ panel.  So far we are very pleased with the sales of these too.  We do plan to delve into other sorts of non-book projects in the future.

If you go on social media, you can see loads of these book images all around.  People are excited about these books and they are having fun with them too.  What a fun and easy project to make with a child or grandchild.  That is why we just decided to continue to produce some more books to be offered for sale at the May market.  Don’t tell anyone, but the plan with some of the new books is to have appendages hanging off of the bottom as opposed to on the top. Think of feet hanging off or something like that.  Rest assured, it is going to be adorable.  Please note that we plan on keeping these books as basics until the sales tell us to drop them.

So in my infinite wisdom (which isn’t much), I have reached out to the real publisher of the hardcover Sandra Magsamen books about the possibility of having our sales reps sell the books to you.  In case you haven’t been in a kid’s book store recently, you probably didn’t realize that these types of books are sold in hard cover with the appendages and all.  With that, I wanted to reach out to shop owners and resellers of fabric to see if they would be interested in offering the books in their stores.  They sell for around $7.99 retail.  What do you think?  Is this something that you would consider? Please do let me know and I can continue to pursue the possibility of offering the hardcover books to shops across America.

In closing, I have 3 things to say:

  1. I can’t wait to see all our competition trying to copy this idea.  Just remember that ours are the real deal.  Stick with Studioe & Sandra Magsamen.
  2. If you made it this far in my blog and want to join me, my staff, some licensed designers, sales reps and other shop owners at a dinner at market in St. Louis, please email scott@jaftex.com to be eligible because space is limited.  You must be an existing customer in good standing to be considered.  I would love to have you join in on this intimate dinner with others in our great industry.  We always have a lovely time.
  3. The VDTA Vacuum & Sewing Show in Vegas is coming up quickly in early February.  I will be there at booth 855, so please stop by to say hello and see what’s going on.

That’s all she wrote folks.  Keep on buying and selling the awesome Studioe “books on steroids” by Sandra Magsamen.  Have a great week.

Regards,

Scott “definitely not on steroids” Fortunoff    

Tales Of A Fourth Generation Textile Executive: Happy New Year! & Blogoblog Revisited

Dear Friends,

On behalf of myself, my family and everyone at the Jaftex Companies, we wanted to wish you a very Happy New Year!  We hope that all your goals are achieved and that all your dreams come true.  To 2017!  Cheers!

As mentioned in some of my more recent blogs, I wanted to repost some of my favorite blogs.  Here is my blog about blogs a.k.a. blogoblog from June 25, 2014.  Please enjoy.

In anticipation of my school house speaking engagements at the Shipshewana Show this week, I have been scouring my past blogs (blogsweep) for inspiration (blogspiration) and ideas (blogcepts).  In doing so, I have learned a couple of things (blogifacts) and have made up some new blog words (bloginology) to describe these concepts.

Long blogs stink.  I pledge to keep my blogs short (microblogging) as no one wants to read a long and boring blog (blogasleep).  Going forward, long blogs will be separated into more bite sized pieces (blogobites) so as to avoid the fear of blog disease (bloganoia).

I crack myself up which is funny in itself.  While reading my past blogs in bed (blogsomnia), I have broken out in hysterics (blogsteria), so much so that my wife is wondering what in the blog is wrong with me.  I guess I am my own best audience which is kind of funny because I probably am the only one that reads these blogs anyway.  I hope other people are laughing too as laughing is healthy for you, just like quilting.

More photos.  Blogs are so boring without more pictures.  Therefore, going forward, I promise to have more photos (blogcandy).  Ironically, I can’t think of any good photos to go with this blog, but so blog it.

This is what I learned from my bloganalysis.  Please let me know if you have some bloggestions as I always love to hear from my blogees.

Blogging off!

Scott Blogunoff

Tales Of A Fourth Generation Textile Executive: The Charity Gift That Keeps On Giving

Both of my parents are turning 70 this year.  Every year the family goes through the same struggle of figuring out what gifts to get them.   Of course, this year is a big birthday, so we need to step things up a little bit, right?  Enough of the belts, night gowns, gift cards, wallets, scarves and other material things that are here today and gone tomorrow.  This year it was time for a gift that keeps on giving.  I am sure you want to know what it is already, right?

gift

I recently joined the board of the local JCC where I live.  In light of this, our company has started to send the JCC fabric to be used however they deem appropriate.  This got me thinking, and after speaking with my siblings and some of the leadership at the JCC, this is what we came up with (title/description):

The Andrea & Robert Fortunoff Art For Community Program

Art for Community provides opportunities for children and families to participate in meaningful community service projects creating beautiful and functional items made from fabric to be donated to those in need.

Just the other night, we went out to celebrate my mom’s birthday at a local Greek restaurant and revealed this new program to my parents.  I think they were very surprised and they thought it was so cool to have this program named in their honor.  Not only that, but to think that this program could be around for decades to come even makes it that much more special.  In essence, this is the gift that keeps on giving back to our local community.  Moreover, this is definitely something our family can be very proud to be a part of.  I look forward to seeing how this program develops and hope to be able to report some feel good stories to you on this front for many years to come.  In the meantime, if you check out a recent blog of mine, you could see one of the first Art For Community Events.

Enjoy the rest of August!

Scott

Tales Of A Fourth Generation Textile Executive: Peppered Cotton Update

Happy Monday Y’All,

I am going to take a little respite from my blogs on Soldier S and the American Honor line for a little bit to bring some focus back to Studioe Fabrics.  And what better to focus upon than Pepper Cory and Peppered Cottons?

pcs
12 new Peppered Cottons.

If you weren’t aware, we just introduced 12 new colors of Peppered Cottons at the Salt Lake City Quilt Market which you can see immediately above. Please keep in mind that the colors on your screen may be different than the actual fabric.  You know how that goes.  Other than that, there is nothing earth shattering to report on these Peppered Cottons, besides the fact that they are awesome, since most of you are very intimately familiar with the product.

pc project
Free project download to go with the new grouping of colors.

The one thing I do want to point out is that 4 of the new colors are really solid in that the colors in the warp and the weft are the same.  Prior to this, the only color that fell into the solid category was the Flame color 16 which is red with red.  Now, we have White Sugar color 09 that is white with white and a lovely white it is if I couldn’t say so myself.  Then we have Deep Space color 98 which is black with black.  Then we have Buttercup color 81 which is yellow with yellow.  Finally, we have True Royal color 77 which is royal with royal. The only other highlight in my opinion would be the Stonewash color 79 which will be great to go with Americana and denim type projects.  We liked this color so much that we took a shot (no pun intended) and made it the only brand new color to add to the new Peppered Cotton 108 wide quilt backs.  This leads me perfectly in to my next subject…Peppered Cotton 108″.

pcs 108
Introducing Peppered Cottons 108″.

We are really excited about the new wide 108″ Peppered Cottons.  We have been wanting to run this for a long time, but were a little bit nervous because of the bigger price and the large minimums required.  We finally pulled the trigger and are glad we did because the reaction thus far has been overwhelming.  Now we just need to keep our finger’s crossed that the ultimate consumers will love these too.  Stay tuned for the new 108″ and new 44″ Peppered Cottons shipping this September.

 Schoolhouse!
Schoolhouse!

Ok, so what else can I tell you?  Oh yeah, at Pepper’s Schoolhouse at market it came up that we were getting rid of some of the slower moving colors to replace them with hopefully more popular colors.  So I wanted to share the list of colors that we are going to be dropping when we run out of stock.

RIP Sunny Aqua and Ochre.
RIP Sunny Aqua and Ochre.

Color 52 Sunny Aqua and color 56 Ochre are gonzo….no more here, RIP. Sorry. If you have any available, you might want to hoard it because one day it will be very valuable.  Here is the list of colors that are next in the hopper to go the way of the Sony Walkman (in order from lowest amount in stock to highest).

  • 91 Citrus Yellow
  • 90 Grellow
  • 71 Pansy
  • 03 Paris Blue
  • 12 Char-gold
  • 20 Pearl
  • 02 Orchid
  • 97 Greige
  • 04 Sienna
  • 92 Raisin
  • 74 Violet
  • 05 Lavender
  • 15 Pale Persimmon

Now that you got all that, I did want to also share a Youtube Video of Pepper’s Schoolhouse from Quilt Market.   

And last, but not least, I wanted to share the New-Peppered-Cottons- Advice Sheet  March 2016 about how to work with Peppered Cottons written by none other than Pepper herself.  Please read carefully as she really knows her stuff.  Take my word for it.

That’s all she wrote folks.  Have a great week.  Don’t forget to apply lots of suntan lotion.

Until Next Week,

This is Studioe Scott Signing Off