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Quaker troubles shake industry

May force scramble to replace fabrics

Susan Andrews -- Casual Living, July 9, 2007

Quaker Fabric (Fall River, Mass.) had been struggling for some time, but few competitors and customers were prepared for the major upholstery fabric supplier’s announcement last week that it may not reopen after its summer shutdown, scheduled to end July 15.

The company said it will likely shut down and liquidate because it can’t meet the terms of its lending agreements, and consequently lenders will only advance funds on a discretionary basis.

In a press release, Quaker said there is “significant uncertainty” about whether the company will have enough liquidity to continue operating. Larry Liebenow, president and CEO, and other company officials did not return phone calls last week. 

Publicly held Quaker has reported losses in 12 consecutive quarters, most recently a loss of $5.1 million on sales of $32.6 million in the first quarter of this year. Sales were down 29.6% from last year’s first quarter.
Quaker sells to hundreds of domestic upholstery manufacturers, who could be scrambling to fill their fabric needs if the company folds.

“It’s a dark day and sad one for the domestic upholstery fabric business,” said Bob Ellsweig, a veteran of more than 41 years in the business and vice president of sales at fabric supplier Microfibres. “Eventually the pendulum will swing again and the furniture industry will be looking for domestic resources and, sadly, two majors have left the scene in the past six months.”

Joan Fabrics filed for Chapter 11 bankruptcy protection in April and its assets were sold at auction last month.

“At the end of the day, everyone in the industry should remember that nothing stays the same,” Ellsweig said.

Mike Shelton, president and CEO of Valdese Weavers, said the Quaker announcement “is devastating to our industry. My first thoughts are about all the people at Quaker who are the most affected by this. I’ve always considered them worthy competitors and some are goods friends. From an industry perspective, the entire supply chain is going to be severely impacted, even creating the position for additional failure in the industry.”

He predicted a “mad scramble” by retailers, furniture manufacturers, fabric and yarn suppliers and fiber producers to fill a void left by Quaker’s departure.

“In this case, I feel that no one in the supply chain was prepared for this to happen to Quaker so quickly, without even an attempt to reorganize under Chapter 11 protection, which could have allowed for continuing operations,” Shelton said.

“This is a sad day for our industry,” said David Young, executive vice president of sales at Morgan Fabrics. “When an industry leader closes its doors, it sends shock waves throughout. The whole industry is changing — the amount of furniture manufactured in the United States is shrinking. As fully upholstered furniture and cut-and-sew grows, the pie shrinks for U.S. fabric suppliers.”

Quaker Fabric began in 1945 as a small family-owned mill in Fall River, one of New England’s textile centers.
Liebenow and other investors acquired the company in 1989. In the following decade, Quaker developed a position as a design leader and became a top U.S. supplier of chenille yarn, a favorite among consumers for its soft hand.

By 2000 the company had sales of $303 million. Its customer list included nearly every U.S. upholstery manufacturer and it had a thriving export business.

Sales peaked in fiscal 2002 at $365.4 million. However, as trade restrictions were lifted in 2005 and cheap imported fabrics flooded the market, Quaker’s business suffered. Sales in fiscal 2006 were $151.7 million, and the company reported net losses of $25 million in 2005 and almost $38 million in 2006.

As Quaker struggled to find its competitive footing, it consistently pointed to foreign competition as the root of its troubles. Last year, the company finally started producing goods in China through a partnership with a mill there, but the move may have been too little, too late.

Fall River’s mayor said about 900 people in the town will lose their jobs if the company doesn’t reopen. An ad ran in the Fall River Herald News last week telling Quaker employees that they would be entitled to the money in their 401(k) accounts and that arrangements would be made for them to collect their personal belongings from the plants if the company doesn’t reopen.

In the ad, Liebenow said, “Please know that I have always been proud to be a member of the Quaker team and I am personally grateful to each and every one of you.”

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