As the world economy recovers and demand for goods rises, a surge in both labor and raw materials costs is squeezing retailers and manufacturers who have run out of ways to pare costs on clothing. Cotton has more than doubled in price over the past year, hitting all-time highs, and the price of other synthetic fabrics has jumped roughly 50 percent as demand for alternatives and blends has risen.
Consequently, clothing prices are expected to rise about 10 percent in coming months, with the biggest increases coming in the second half of the year, Burt Flickinger III, president of Strategic Resource Group, told the Associated Press. “All of our brands, every single brand, will take some price increases,” adds Eric Wiseman, chairman and CEO of VF Corp., whose brands include The North Face, Nautica, Wrangler and Lee. Cotton accounts for half the production cost of jeans, which make up about one-third of VF’s sales, he told investors recently.
Retailers are trying to figure out whether consumer demand that gave them strong holiday sales will last, as the fear is higher prices will nip that budding demand. Stores that cater to low- and middle-income shoppers will have the hardest time passing along price increases. Cotton prices have jumped to a 150-year-high, rising to $1.90 per pound recently, more than double what it was a year ago and just ahead of the $1.89 record hit during the Civil War, according to the International Cotton Advisory Committee.
Up until now, retailers have resisted passing along price increases to shoppers by shifting production to lower-cost regions like Vietnam, turning to other materials and absorbing cost increases. But they’re reaching the limit, according to Kevin Burke, president and CEO of the American Apparel & Footwear Association.