DeSales Trading Company, Inc, since 1969, has made a name in the textile business by buying and selling off-grade yarns, odd-lot or as some term, stock-lot yarns. So what is the meaning of stock-lot yarns? Stock-lot is a term widely used in Europe and some other regions of the world as inventory that is not selling, inventory not generating any sales, or as excess inventory. Within the United States textile yarn market, stock-lot also means odd-lot.
A producer of synthetic yarns, a texturizer of synthetic yarns, or a spinner of yarns can be compared to a lumber mill. When a lumber mill is cutting logs to make lumber, saw dust is produced. Not 100% of the cut lumber ends up as lumber. Manufacturers of yarn produce some percentage of second-quality yarn and they also have some percentage of yarn that does not get sold for some reason or another. This is their stock-lot or odd-lot yarn inventory.
As a norm, stock-lot yarns are first quality yarns—not second quality.
From an accounting perspective, if a yarn manufacturer is valuing their stock-lot inventory properly, they are discounting their non-moving inventory either each fiscal quarter or at the end of the fiscal accounting period. This practice softens the blow on the profit and loss statement when the non-moving inventory is finally sold off.
If a manufacturer does not make a practice of writing down their stock-lot yarn inventory on a regular basis, the inevitable will happen: stock-lot inventory continues to increase and will eventually choke a financial statement. In essence, the company’s value will be over-stated.
A buyer of stock-lot yarn is usually a company who has a special reduced price point they are looking to meet. The buyer may have a promotional program they wish to produce product for or they want to offer a customer a product at a reduced price. A buyer of stock-lot yarn must realize what they are buying is a one-time opportunity.
A yarn buyer who subscribes to the adage: “You make your money on your buy—not your sale” is a buyer who understands the value of stock-lot and odd-lot yarns.