Industry reeling as Kiwi icons fall hard

Lingerie company Bendon is becoming more price-conscious. Photo / Supplied

As new Zealand's besieged apparel industry reels from Line 7's receivership, a Twitter posting reads: "Stop calling Line 7 an iconic brand - it was just ugly women's wear."

The tweet reflects sentiment among industry representatives who say by straying from its core sailing values and diversifying into women's wear, Line 7 became exposed to a more fickle consumer.

The best thing a company can do in a recession is stick to its knitting, brand strategist Brian Richards says. But Line 7 "lost its way and it wasn't to do with exchange rates".

Richards says it lost distinctiveness, putting too many products under one umbrella, from wet weather gear for farmers to casual women's wear.

Clothing retailers have had four successive seasons of low turnover squeezing their profit margins, the volatile Kiwi dollar increasing manufacturing costs, banks being restrictive about funding, and landlords unwilling to lower shop rents.

Little wonder economist Brian Gaynor says there will be "more problems in the textile industry than anywhere else".

Even the nation's favourite lingerie company Bendon is "rebalancing" the leases of its retail network in Australia and New Zealand, says chief executive Simon Hughes.

So far this has meant closure of its Manukau retail store, and other closures are in process as it moves to focus on outlets. Less well-off areas such as Manukau are "trading down", he says, making the viability of marginal stores questionable.

"We're following the much more price-conscious New Zealand market."

Hot on the heels of Line 7's receivership came news of Pumpkin Patch's retreat from the United States with the closure of around 20 of its 35 stores.

Gaynor says Pumpkin Patch tried to expand too quickly across the divergent US markets. The company's chief financial officer Mathew Washington says the economic environment there was "extremely difficult" for a new entrant.

Pumpkin Patch's debt is 60 per cent lower than this time last year, Washington says. He expects it to have around $40 million of debt at the end of the month, which he says is low given the size of the business.

"We've made efforts to reduce our debt and are now relatively comfortable with our debt levels. I think the market is as well."

But not everyone is in the same boat. A spokesperson for one of the country's biggest textile wholesalers who requested anonymity says "a lot of people owe a lot of money around town".

Mapihi Opai, chief executive of Fashion Industry New Zealand, urges retail landlords to "become more realistic about what returns can be in the current climate" rather than drive more companies out of business.

"It's sad to see an iconic brand like Line 7 go into receivership," says Opai.

"Ross Munro is respected in the industry and it's a company that scored huge coups around major international sporting events."

Many other clothing companies are caught in discounting spirals with competitors on a last-man-standing basis, says Richards.

The industry's future is uncertain, Opai says. "It's time to do a stocktake of what we have, decide what we want to keep, what we want to give away and establish a strategy for how to achieve that."

Chief executive of Textiles NZ, Elizabeth Tennet, says New Zealand has an advantage in locally produced, high-quality natural fibre, such as merino wool. Companies such as Icebreaker are doing well and will do even better as the global economy recovers.

"There's an insatiable demand worldwide for those sorts of textiles," says Tennet. She believes companies need branding that tells the New Zealand story, and to collaborate to win niche opportunities.