Seardel can't support bra maker

Cape Town - Clothing and textile conglomerate Seardel Investment Corporation [JSE:SER] has proposed closing down Intimate Apparel, a division that makes well-known brands of lingerie and swimwear.

This is the second major operational shut-down at Seardel since empowerment giant Hosken Consolidated Investments [JSE:HCI] took control of the company in 2008. Last year Seardel was forced to close down textile group Frame's vertical pipeline.

The proposals could affect over 800 permanent employees. Consultations with unions are already under way.

In an announcement on Thursday evening, Seardel CEO Stuart Queen stressed the decision to shut down Intimate Apparel had been taken in principle – subject to any viable alternatives and consultation.

Queen said the manufacture of niche clothing products in South Africa remained challenging.

But he stressed that Intimate Apparel faced a number of unique pressures, including the fact that the manufacture of bra's was complex and labour intensive.

"The garments produced are generally of a very high minute rate with low selling prices, making it extremely difficult to recover the costs of labour inputs."

He added that bra's are close skin-fitting items that required significant investment in design, pre-production technical resources and quality processes.

"This investment in technical personnel is particularly expensive given their unique skills, and cannot be recovered in the selling price of the garments unless significant volumes with acceptable margins are achieved."

Queen said margin pressures had completely eroded selling prices and made it impossible to recover the costs of raw material inputs, labour and other overheads.

Also wage and other differentials with Seardel's international competitors meant local production was not competitive. Queen pointed out that the average imported landed cost of a bra was typically 20% lower than a locally manufactured item.

"The strategy to source fashion brassieres and core brassiere lines from offshore companies by retailers in order to realise the targeted retail margins has overcome Intimate Apparel's ability to compete".

Queen said the pressures exerted over recent years have translated into significant ongoing losses being incurred at Intimate Apparel.

"We have, over a number of years, looked at every possible avenue to remedy this situation - including major reorganisations, restructuring and the downsizing of operations."

Queen said Intimate Apparel had invested in equipment, facilities and training to improve productivity and efficiencies. He said major strides hade been achieved in terms of "world class manufacturing principles" to improve productivity and efficiency levels at Intimate Apparel.

"Despite the successful implementation of many of these initiatives, it has become clear that improved efficiencies alone will not be sufficient to compensate for the structural and depressed margin issues facing the division."

 - Fin24.com