Classic Knitwear
Classic Knitwear and Guardian: A Perfect Fit
Problems
Classic Knitwear’s most prominent dilemma is its low gross margin. In comparison to the 30%-40% gross margins of the leading branded product manufacturers, Classic Knitwear’s gross margin of 18% is alarmingly low. The company attributes their low gross margin to its private label and unbranded knitwear having no branded recognition among retail customers. Although Classic Knitwear had recent success in shrinking that gap between themselves and the leaders, the growth-hungry board still demanded better results. As a publicly traded company reporting $550 million in revenue, Classic Knitwear needed to make decisions that satisfy its board and investors, as well as better the company in all ways possible. One of the successes that the company experienced is low production costs through their state-of-the-art offshore production hub that they established in the Dominican Republic. Because of Classic Knitwear’s moderate cost advantage over other US producers, rival companies such as JamesBrands and FlowerKnit had noticed Classic Knitwear’s model. It would only be a matter of time until these rivals reached similar or better manufacturing efficiencies. Although Classic Knitwear is the #2 player in the Wholesalers screen-print sector with 16.5% market share, it only possessed 1% market share of the private-label sector. The importance to increase gross margins to stay successful and relevant, especially in the private-label sector where its market share is so weak, could not be more important.
Objectives
Classic Knitwear’s major short-term objective is reaching and sustaining a gross margin of 20% in 2006. Because the low gross margin is tied to Classic Knitwear’s poor brand recognition, the company needs to focus on innovating their products and raising recognition. To reach this objective and maintain consistency in stock price, Classic Knitwear knows that it needs to communicate
Problems
Classic Knitwear’s most prominent dilemma is its low gross margin. In comparison to the 30%-40% gross margins of the leading branded product manufacturers, Classic Knitwear’s gross margin of 18% is alarmingly low. The company attributes their low gross margin to its private label and unbranded knitwear having no branded recognition among retail customers. Although Classic Knitwear had recent success in shrinking that gap between themselves and the leaders, the growth-hungry board still demanded better results. As a publicly traded company reporting $550 million in revenue, Classic Knitwear needed to make decisions that satisfy its board and investors, as well as better the company in all ways possible. One of the successes that the company experienced is low production costs through their state-of-the-art offshore production hub that they established in the Dominican Republic. Because of Classic Knitwear’s moderate cost advantage over other US producers, rival companies such as JamesBrands and FlowerKnit had noticed Classic Knitwear’s model. It would only be a matter of time until these rivals reached similar or better manufacturing efficiencies. Although Classic Knitwear is the #2 player in the Wholesalers screen-print sector with 16.5% market share, it only possessed 1% market share of the private-label sector. The importance to increase gross margins to stay successful and relevant, especially in the private-label sector where its market share is so weak, could not be more important.
Objectives
Classic Knitwear’s major short-term objective is reaching and sustaining a gross margin of 20% in 2006. Because the low gross margin is tied to Classic Knitwear’s poor brand recognition, the company needs to focus on innovating their products and raising recognition. To reach this objective and maintain consistency in stock price, Classic Knitwear knows that it needs to communicate