KANNAPOLIS — Kmart has announced plans to stop buying towels from Pillowtex Corp. after Sept. 14.

That means Kmart, with more than 2,100 stores in the U.S., will no longer buy trademark and private-label brands of towels from Pillowtex, said Kmart spokeswoman Michelle Jasukaitis.

The retail chain will continue selling other products made by Pillowtex, such as comforters and sheets, Jasukaitis said.

Pillowtex Chief Executive Officer Chuck Hansen did not return a telephone call to his Dallas, Texas, office Wednesday afternoon seeking comment.

Kay Norwood, an industry analyst with Wachovia Securities, said without a dollar value, she can’t comment on the specific impact the cancellation will have on Pillowtex. But she isn’t sounding any alarms.

“Was this a huge piece of Pillowtex’s business? I doubt it,” she said. “Pillowtex does $1.6 billion in business annually, so a towel program at one retailer isn’t going to make or break them.”

Pillowtex is one of many manufacturers that develops and produces products for Kmart, Jasukaitis said.

She said the company does not release information about a contract’s value or figures about the percentage of its retail stock that a particular company supplies.

The only information Jasukaitis said she could release is that Kmart has “stopped doing the towel business with Pillowtex ... Sept. 14 is the date the last towel order will be placed with them.”

The decision is the latest bad news for Pillowtex, which employs around 5,000 workers at Fieldcrest Cannon plants in Rowan and Cabarrus counties.

The company’s troubles began last year when a new computer system to track sales and collections failed to function properly.

Inventory swelled to more than $500 million, backed up by slow retail sales. The company says it has reduced its inventory, partly through plant idlings.

The company has posted operating losses the last several quarters and announced losses of $19.8-million for the first six months of this year. The company lost $31.8 million in 1999.

One billion dollars in debt, the company has at times struggled to pay its creditors and the vendors who supply products to its manufacturing plants.

Pillowtex has streamlined operations, announcing earlier that it will close a sheet-making plant in Salisbury in October. And Hansen said last week the company will close a plant in Rocky Mount if Pillowtex doesn’t find business to replace a contract with Ralph Lauren that expires in 2001.

Hansen met with nearly 140 suppliers last week at the company’s offices in Kannapolis. He wanted to thank them, he said, for their support and reassure them about the company’s future.

The meetings were off limits to reporters, and afterwards, Pillowtex security guards stopped traffic on Main Street and ushered the visitors past a Post reporter at the main exit.

In an interview with Home Textiles Today, Hansen said he also assured them that past-due payments from Pillowtex would be current later this year.