No silver threads and golden needles.

• Position: Textiles - Industry Overview

1994 wasn't very good for textiles and apparel, but 1995 was the year when the industry came, to put it politely, a little unraveled. Large companies such as Burlington Industries, Cone Mills and Galey & Lord (all of which produce fabric for clothing companies) saw pressure from retailers shrink margins. And things weren't any easier for smaller or niche companies in the sock-and-stocking business, says Sid Smith, president of Charlotte-based National Association of Hosiery Manufacturers.

"We had much of the same scenario that basic textiles did," he says. "We faced rising raw-materials cost also and total resistance on the part of retailers to pass that cost on." Wal-Mart and Kmart, which account for half of all sock sales and a third of sheer-hosiery sales, wouldn't budge. "Hosiery manufacturers had to either not make sales or lose sales or absorb the extra cost."

The trouble started at Christmas 1994. Higher interest rates meant consumers were struggling under increased debt loads. What's more, the weather was unseasonably warm. Retailers "were caught with much too much inventory," First Union economist Mark Vitner notes. They stopped placing orders, and the drop in demand hit textile companies. In North Carolina, spring was no lift - textile production decreased 10.4% during the second quarter, and apparel slipped 17.9%, Vitner says.

Stock prices followed. Between October 1993 and November 1995, the Interstate/Johnson Lane textile index of 17 companies dropped 17%, while the S&P 400 rose 32%. Margins were squeezed by cotton prices, which jumped from 54 cents per pound in early 1992 to a high of $1.10 in mid-1995.

To cap it off, "casual day" took a firm hold on corporate America. Wearing what you want on Friday doesn't make textile companies look good, Vitner says. "Men's suits are predominantly made in the United States with U.S. textiles. Casual clothing is mostly made overseas." So, one casual day a week means "a 20% drop in demand for men's suits and a 20% drop in demand for pantyhose and ties and so on."

But what's bad for some is good for others. "You're talking to the happy supplier," says John Bakane, chief financial officer of Greensboro-based Cone Mills, the world's largest producer of denim. Cone had record sales, but its margins were hammered by the cost of cotton.

Many clothing companies had made deals with foreign suppliers, expecting things to get better after 1994. They didn't. "You can't cancel an irrevocable letter of...