How Icahn Enterprises Turned Its Home Fashion Segment Around

Icahn Enterprises (IEP) conducts its Home Fashion business through its indirect wholly owned subsidiary, WestPoint Home (or WPH). On August 8, 2005, IEP acquired a controlling stake in WestPoint International out of bankruptcy.

Later, IEP streamlined its operations by moving manufacturing to the low-cost destination of Bahrain, reducing its labor cost, sourcing goods at lower prices, and improving unfavorable arrangements. These actions have helped IEP’s Home Fashion segment.

WestPoint Home is engaged in the manufacturing, sourcing, marketing, distributing, and selling of fashion and core home textile products. It owns some well-known brands in home textiles such as Martex, Grand Patrician, Luxor, and Vellux. WPH also sells licensed brands such as Izod, Under the Canopy, Southern Tide, and Hanes.

The home fashion industry is fragmented and highly competitive. Future success will, to a large extent, depend on WestPoint Home’s ability to be a competitive low-cost producer.

WPH competes with both foreign and domestic companies on the basis of price, quality, designs, and customer service. It also foresees competition in the future from companies that are currently its third-party suppliers.

WPH’s success depends on its ability to remain competitive. The areas that need constant focus include marketing, product development, price, quality, brand names, manufacturing capabilities, distribution, and order processing. Let’s examine the EBITDA margins of a few home fashion players in the US.

Icahn Enterprises’ Home segment has just turned around. On the other hand, Walmart’s (WMT) margins seem to be compressed as they are engaged in both retail and wholesale operations in various formats around the world.

Bed Bath and Beyond (BBBY), Home Depot (HD), and Walmart are among the top retailers in the US. Year-to-date, these companies’ returns have been -34%, 19%, and -13%, respectively. The S&P 500 Index (SPY) fell by 1% for the same period.

Next, let’s analyze why the Home Fashion segment’s margins are starting to rise.