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Style And Stamina
Consider Supreme International Inc., a publicly held company that designs men's sportswear at its headquarters in Miami, contracts with foreign manufacturers to handle the production of its pants and shirts, then imports the finished product for U.S. distribution. Bursting at the seams, Supreme has a work force of 350 - nearly five times greater than in 1992 - and still is hiring as it prepares to move later this year into a new 238,000-square-foot facility, now under construction just west of Miami International Airport.
This is a rather tense time of year for George Feldenkreis, chairman of the board and chief executive officer of Supreme. In January, the company began the new year by presenting its fall merchandise for 1997 to major U.S. retail chains - kicking off what Feldenkreis calls "the real fall selling season." Supreme's biggest customers - including J.C. Penney, Kmart, Sears and Federated Department Stores - will have placed most of their apparel orders for the fall of 1997 by mid-February. "I've already ordered product for fall '97," says Feldenkreis. "We are already out on a limb for fall '97."
Not to worry. Stock analysts who follow Supreme foresee a takeoff, not a tumble. According to a December report by First Call, a division of Thomson Financial Services in Boston, analysts expected Supreme to earn $1.64 per share in the current fiscal year - up from an estimated $1.33 for the fiscal year ended Jan. 31, and $1.13 the previous year.
Supreme's traditional focus on men's sportswear business is paying off as more and more American men dress casually for work. "I think it's irreversible," says Feldenkreis, 60, a veteran of the garment trade, still sniffling from a cold he caught on a five-week business trip to the Orient. "We don't do suits or jackets. We don't do many dress shirts."
Supreme probably will report revenues of about $150 million for the fiscal year that just ended in January - more than fourfold the level of five years ago. Acquisitions are helping to boost sales. Last year Supreme paid $18 million for Munsingwear Inc., an apparel firm that had annual revenues of about $30 million [FT, "Penguin Power," July 1996]. The deal gives Supreme the rights to sell apparel under such brand names as Grand Slam, Munsingwear, Penguin Sport and Penguin Club.
Feldenkreis has never gotten deeply involved in women's apparel, which has been a retail disappointment in recent years. After fleeing Castro's Cuba with his family in February 1961, he started Supreme International in 1967 and began importing guayaberas - the loose-fitting, pleated shirts favored by Hispanic men - and selling them to stores in Florida and Puerto Rico. By the early 1990s, Supreme International had expanded into in-house apparel design, and had launched a popular line of printed knit shirts for men, marketed under the company's Natural Issue label.
Using low-cost apparel manufacturers in Korea, Supreme introduced Natural Issue shirts that retailed for less than $30 - outselling comparable Italian-made shirts priced at more than $100. "Burdines was the first that really pushed them, and then later, J.C. Penney and others did," Feldenkreis says. "When they came into the store, they were blowing out because they were a helluva value."
Holding down production costs has been important to Supreme's success. Though sold in the U.S., the bulk of the company's apparel is produced in low-cost factories in Asia. In its 1996 annual report, Supreme said it uses about 110 suppliers in the Orient and about 20 in Central America to handle 90% of its production work. "They've proven that they can do sourcing worldwide," says Leslie McCall, an analyst with Oppenheimer & Co. in New York, who expects Supreme's earnings per share to jump approximately 20% this year.
Supreme doesn't use higher-cost factories in its own backyard. Several manufacturers in Miami are capable of producing for Supreme but "not at the prices I would sell for," Feldenkreis says. However, a growing share of Supreme's merchandise is being produced closer to home.
In recent years, Feldenkreis says many apparel manufacturers based in Korea have opened factories in Central America, drawn by cheaper labor there. And Supreme has followed them: Currently, about one-third of Supreme's annual output is produced by Korean-owned factories in Guatemala, Honduras and San Salvador. Four years ago, none of the company's apparel was produced in Central America.
"Today there are over 200 Korean factories in Guatemala, about 100 in Honduras," Feldenkreis says. "A lot of Asia is coming to Latin America - which is very healthy for those Latin countries and for the United States." In his world view, countries such as Guatemala, the Dominican Republic and Mexico "are good partners of the United States in the sense that, the money they make, they spend it here - whereas the money we spend in Japan or China, we don't see so much of that here."
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Trade Briefings
J. Antonio Villamil, former U.S. Under Secretary of Commerce under President Bush and now a Miami-based corporate consultant, says further U.S. initiatives to remove trade barriers may be slow in coming: "The results of the November elections favor congressional and executive attention on domestic issues over an aggressive trade policy."
Enterprise Florida and the Broward Economic Development Council will lead an export marketing mission to San Jose, Costa Rica, and Tegucigalpa, Honduras, March 3-8.
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ZONING PROPOSALS
New Shingles For A Tax Shelter
More than a dozen areas around Florida have been named foreign trade zones, a lucrative status granted by the U.S. Department of Commerce. Companies in the zones pay no U.S. duties on goods they import, modify and export. But federal tax incentives alone aren't enough, contends the Florida Free Trade Zones Association. The trade group's members want relief from state sales tax levied on leases and goods consumed in their foreign trade zones.
"Seventeen foreign trade zones have been established in 15 Florida communities as cornerstones of their economic development efforts in international trade," according to a position paper produced by the trade group. "Over the last three years, approximately 5% to 10% of Florida's international trade has moved through its foreign trade zones." The author of the position paper, Tommy L. Berry, senior vice president for Sandler & Travis Trade Advisory Services in Panama City, wrote that "Florida zones need additional economic incentives to face the stiff competition from foreign trade zones in the United States and in the ports of Caribbean, Central and South American countries. ... Foreign trade zones in 18 states benefit from state-adopted economic incentives which supplement the federal incentives."
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The Southeast U.S.
How Florida Stacks Up
vs. Alabama, Georgia Louisiana, Mississippi, North Carolina, South Carolina, Tennessee and Texas.
2nd Population
3rd Dollar value of exports
7th Exports per capita
Source: Enterprise Florida
