The mill ticket.

• Position: North Carolina's textile industry - Industry Overview

Tough times for Tar Heel textiles might turn better because of what's happening across the border.

It's been a tough year for textiles, partly because the last two years were too good. Steady demand kept sales up for many yarn and fabric makers, who boasted record profits in 1992 and 1994. Suppliers responded by hiking prices of raw materials.

"I somewhat cynically call it, 'Making hay while the sun shines,'" explains Kay Norwood, an analyst for Interstate/Johnson Lane in Charlotte. Cotton, for instance, moved from 64 cents a pound to a high of more than 80 cents.

But Norwood says there are mitigating circumstances for fiber suppliers, particularly those providing synthetic yarn for spinning such as DuPont, Hoechst Celanese and BASF, who saw their own petrochemical raw products get more costly in 1994.

The problem for companies such as Greensboro-based Cone Mills, the world's largest producer of denim, is that consumers weren't particularly keen on paying the price when the higher costs were passed along to them. The entry of new cut-rate and private-label products cut into margins.

"I don't think consumers are quite as much into status with jeans as they used to be," Norwood says. Cone's third-quarter 1994 income dropped to $8.6 million, down 28% from a year earlier.

Some things went a little smoother last year. Wrinkle-resistant cotton helped boost Greensboro-based Galey & Lord's income from apparel fabrics 53%, to $9 million. But there were no fashion crazes to catch consumers' attention. As the economy revved up, disposable income got spent on durables such as cars, televisions and furniture.

"I think it's a natural cycle," says Guy W. Ford, director of research for Richmond, Va.-based Scott & Stringfellow. "Consumers will shift their spending to nondurables. Consumer-debt levels are up, and that can only go on for so long."

While the feeding frenzy for durables hurt some Tar Heel textile companies, others benefited, particularly Greensboro-based Guilford Mills and High Point-based Culp. Both make fabric for home furnishings, and Guilford gets about 40% of its sales from material used in car upholstery. Culp posted record sales and earnings in its second quarter, ended Oct. 30, and is beginning to offset the debt that resulted from its purchase in 1993 of upholstery maker Rossville/Chromatex in Georgia. Guilford's earnings were up 4.5% for fiscal 1994 and almost 50% in its fourth quarter.

But domestic markets were only part of the story...