Aurora Textile

1049 Words Jul 28th, 2014 5 Pages
Introduction
Aurora Textiles is a textile company that specializes in hosiery, knitted outerwear, woven, and industrial and specialty products. They develop finished fabric to meet specific needs as the leading yarn manufacturer established in the 1900s. However, both Aurora and the whole U.S. textile industry have been struggling financially due to globalization and other external factors. Aurora itself may not have responded quickly enough to the deteriorating business environment and has caused their net earnings and concerning ratios leaning toward the negative side. The company needs to either make crucial amends with new investments or stay with its current situation.

Problem #1
How has Aurora Textile performed over the past
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During 1999 to 2000 in the U.S., 150 textile plants were closed and 200,000 industry jobs had been lost. Despite cutting a good amount of SG&A spending to continue operations, other financial environments still arose and expected to come for Aurora. Based on the future of the textile industry, most research analysts still believed that it would grow around 2%, with prices and costs increasing at a 1% inflation rate. On the other hand, even with a possible growth rate, numbers still doesn’t look too good based on the financial analysis and that difficult financial environment was expected to continue.
In this type of situation, when investors still find faith in potential growth toward the industry, it’d be toward the four-segmented market: hosiery market, knitted outerwear, woven, and industrial and specialty products. Hosiery market, which accounted 43% of Aurora’s revenue, had attractive margins with some of the most profitable hosiery companies in the world by producing heavy yarns. Cotton yarns were used for white athletic socks in the U.S. and nearly half of U.S. population owned socks made with Aurora yarns. Not only limited to Aurora, but the entire textile industry, the hosiery market defended against global competition. The bulkiness of the products and heavy yarns successfully discouraged foreign producers due to its costly transportation. Additionally, this type of production was highly automated to a lower labor

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