Will Pluma get fleeced in a tough market?

• Author: Gibson, Dale

The executives at Pluma Inc. (PLU-NYSE) must love the Biblical tale of David and Goliath. Facing old-line apparel giants, the young Eden-based company is the one with the slingshot.

Pluma's $55 million market value is dwarfed by VF Corp.'s $6.3 billion, Fruit of the Loom's $2.2 billion and Russell Corp.'s $969 million. That's not its only number that pales. Last year, it posted a gross margin - a key indicator - of 12%. VF racked up 34%, Fruit of the Loom, 28%, and Russell, 30%. Pluma has struggled to operate efficiently and to sell higher-margin lines.

Its troubles started only recently. After going public in March 1997, it saw a modest run-up in its stock price, which peaked at $15.75. Then last September it announced its third-quarter earnings would be well below the previous year. Analysts hit the escape key on their "buy" recommendations and cut '98 estimates. Pluma's stock fell 25% in one day. A fourth-quarter loss followed, pushing earnings for '97 to 27 cents a share, down from $1.09 in '96.

TAR HEEL STOCK WATCH Expensive stocks (highest price-earnings ratios among North Carolina stocks) Company P/E Recent 52-week ratio price range Hampton Industries 191.0 $6.88 $6.25-9.77 Pluma 167.2 6.69 6.38-14.75 Applied Analytical Industries 143.8 14.38 9.00-27.25 FAC Realty Trust 100.0 8.00 6.00-10.00 Waste Industries 99.1 20.81 15.25-27.75 NewSouth Bancorp 63.2 33.50 24.50-35.50 Brad Ragan 58.6 39.25 23.63-39.25 Quintiles Transnational 58.6 49.19 31.00-53.50 Fresh Foods 55.6 15.00 12.25-29.00 Pharmaceutical Product Dev. 46.8 22.00 12.25-25.88 Cheap stocks (lowest price-earnings ratios among North Carolina stocks) Company P/E Recent 52-week ratio price range Standard Commercial 5.2 $11.00 $10.50-18.19 Speizman Industries 8.0 5.25 4.88-9.50 Ridgeview 8.1 6.00 5.25-9.00 Guilford Mills 10.0 20.00 18.50-29.63 Reeds Jewelers 10.1 4.00 3.06-4.38 Kewaunee Scientific 10.4 11.25 6.88-14.50 McRae Industries 10.5 7.00 6.69-10.25 Culp 10.5 12.94 11.50-22.19 Century Bancorp 11.7 17.00 15.25-39.38 Market America 12.5 5.38 4.44-9.25 Still, the company has posted annual profits since its start in 1986 and says its poor numbers late in the year were misleading. It spent $68 million to buy two wholesale distributors, deals that closed in December. The acquisition of Verona, Wisc.-based Stardust Inc. and Los Angeles-based Frank L. Robinson Co., both former customers, could pay off long-term by giving Pluma a national distribution network and making it vertically...