Texfi beats its doom.

• Author: Donsky, Martin
• Position: Texfi Industries Inc. - Company profile

TEXFI BEATS ITS DOOM

Think back to 1970. Remember that mintgreen polyester leisure suit you wore on Easter Sunday? How about that fuchsia double-knit miniskirt your girlfriend turned heads in?

Neither of you would be caught dead in polyester double-knit today. Right?

Back when poly was hot, Texfi Industries was sizzling. "We were king of the double-knits," says Mike Miller, the company's executive vice president. "But when double-knits got sick, we died."

That's no understatement.

With consumers abandoning double-knits as quickly as they had donned them, Texfi's market collapsed. The company lost money eight of 11 years from 1974 through 1984, including a whopping $21.5 million in 1980, when it barely staved off bankruptcy. The company sold plants and other assets to cover losses and pay the bills.

Even then, the 1982-83 recession drained Texfi of most of its remaining reserves. Bankers, creditors, investors - even employees - had given up. Shares, once as high as $68, were selling on the New York Stock Exchange for a buck and change.

"They were in the grave. People were trying to cover them up," says William Kretzer, president and CEO of Unifi, a Greensboro textile manufacturer and longtime supplier to Texfi.

Former Wachovia Bank and Trust President James Styers, a Texfi board member since 1979, summed up the situation this way: "You don't run a company with $40,000 in equity and $55 million in liabilities."

You won't find such sickly numbers in Texfi's latest annual report. Nor will you find any mention of polyester double-knit. "The only thing about the company that hasn't changed is the name," says Kay Norwood of Interstate/Johnson Lane, who like most other financial analysts was ready to write off Texfi a decade ago.

Today, Rocky Mount-based Texfi has some of the better numbers in an industry that hasn't produced many success stories in the past decade. Sales have nearly doubled over the past five years, reaching nearly $234 million in the 12 months that ended Oct. 31. Despite softness this fall and winter in Texfi's apparel-fabrics division, revenues are likely to hit $280 million this fiscal year.

Earnings have grown just as strongly, reaching $1.19 per share last year, compared with a partly 3 cents in 1986.

Texfi dumped more than double-knits. It also ditched the operating strategy that got it into trouble. No longer does the company aspire to be the No. 1 producer of any fabric.

"We want to be the best No. 2 supplier or No. 3 supplier a company can have. Almost all of our customers buy greater amounts from other textile makers," Miller says. This approach enables Texfi to pick and choose its markets.

But Texfi is more than just a remarkable turnaround story. Analysts and investors see it as the prototype textile manufacturer for the 1990s - lean, decentralized and highly automated, focused on creating and exploiting market niches and willing to compete without government intervention.

Chairman and CEO Terrell Sovey, widely credited with leading the turn-around, will have nothing to do with efforts by larger textile makers to fight cheap imports. He is a free trader. "I think the finest thing that ever happened was foreign competition. It really made us get our act together," he says.

For Texfi, that means having just four corporate executives to run a company that employs 3,500 at 15 plants in North and South Carolina.

"Well, there's Terrell and Mike, and Mike has an assistant. Then there's me," says company pilot Bill Adams, who ferries Sovey and Miller from plant to plant.

It wasn't always this lean. Texfi once employed 200 at corporate headquarters in Greensboro - accountants, computer analysts, purchasing agents, marketing...