Clothing groups warn on cotton surge impact
By Jonathan Birchall in New York
Published: February 13 2011 19:31 | Last updated: February 13 2011 19:31
US clothing companies are warning of a jolt in consumer prices in the latter half of this year, affecting everything from socks to evening dresses, as the soaring cost of cotton ends a prolonged spell of price deflation in the sector.
Some US clothing brands have started passing on an initial wave of price increases in their spring collections, after last year’s initial escalation in cotton prices.
But the groups say they expect far sharper rises later this year as the surge in commodity prices moves through the production process and into stores.
Cotton hit a record high on Friday, topping $1.90 a pound amid a shortage of the fibre.
The cost of the commodity has risen 150 per cent since the start of 2010.
Efforts by manufacturers to reduce costs by switching to cheaper alternative materials have also led to sharp price increases in polyester and other synthetic fibres.
Wesley Card, chief executive of Jones Group, whose brands include Nine West and Anne Klein, told the Financial Times that after single-digit percentage price rises in some areas in the spring, consumers would be looking at “price increases pretty much across the board” by the end of the year, with percentage rises as high as double digits.
“It’s going to be relatively broad-based because it affects all denim, no matter what price point, all items including cotton and footwear as well,” he said.
Mike Ullman, chief executive of JC Penney, the mid-range department store, has said the company avoided price increases this spring but faces challenges in the autumn.
“If the cotton price is going to be double what it was a year ago, it will obviously affect retail prices,” he told the FT.
Executives say the clothing industry is as yet unsure about how consumers will react to price rises, after becoming accustomed to prices that have fallen steadily during the past decade due to the emergence of low-cost overseas production and the rise of China.
John Anderson, chief executive of Levi Strauss, said last week that it was too early to calculate the impact because “the consumer hasn’t had a chance to respond to those [prices] yet.”
Mr Card at Jones Group said price increases could vary from as little as $2 on a pair of low-cost jeans at a discounter to $15 on an $80 jacket at a department store.
“It is hard to see where the price elasticity is going to meet resistance at this point,” he said.