Clothing prices could rise 10% in spring; increase could hit Utah later, retailer says
NEW YORK — The era of falling clothing prices is ending.
Clothing prices have dropped for a decade as tame inflation and cheap overseas labor helped hold down costs. Retailers and clothing makers cut frills and experimented with fabric blends to cut prices during the recession.
But as the world economy recovers and demand for goods rises, a surge in labor and raw materials costs is squeezing retailers and manufacturers who have run out of ways to pare costs.
Cotton has more than doubled in price over the past year, hitting all-time highs. The price of other synthetic fabrics has jumped roughly 50 percent as demand for alternatives and blends has risen.
Clothing prices are expected to rise about 10 percent in coming months, with the biggest increases coming in the second half of the year, said Burt Flickinger III, president of Strategic Resource Group.
In contrast, one Utah clothing retailer said the price hikes may not occur until early next year.
"Right now, we're buying for next fall," said Mikella Bean, sales associate at D. Grant Ltd. — a Salt Lake City-based upscale men's clothing retailer. "When I've been there during the buying process for next fall, I haven't seen a huge increase in the cost."
She said, however, that price jumps could be on the longer-term horizon.
"(There could be increases) maybe a year from now or next spring season or even the fall after that," Bean said. "We've almost bought everything we're going to sell in 2011 (and prices are not much higher)."
So if prices of fabric are increasing now, then it wouldn't affect the retailer until 2012, she added.
Bean said some retailers would likely try to mitigate the anticipated increases with strategies that would include attempting to lower expenses in manufacturing.
Meanwhile, some stores have already marked up prices on staple items.
For instance, Brooks Brothers' wrinkle-free men's dress shirts now cost $88, up from $79.50. Levi Strauss & Co., Wrangler jeans maker VF Corp., J.C. Penney Co., Nike and designer shoe seller Steve Madden also plan increases.
More specifics on price increases are expected when clothing retailers such as J.C. Penney Co. and Abercrombie & Fitch Co. report financial results this month.
"All of our brands, every single brand, will take some price increases," said 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 in November.
Higher costs also will affect how clothes are made. Clothing makers are blending more synthetic fabrics like rayon and designing jeans with fewer beads and other embellishments. Shoppers also will have fewer color choices.
Retailers are trying to figure out whether consumer demand that gave them strong holiday sales will last. 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.
"We have been so used to deflation for years and years," said David Bassuk, managing director in the retail practice of AlixPartners. "Customers are going to be surprised."
Janice Mignanelli of Washington Township, N.J., doesn't want any surprises.
"'I'm not going to spend any more than $50 for a pair of jeans," said Mignanelli, a stay-at-home mom shopping at The Garden State Plaza in Paramus, N.J., last week. "I'll just have to cut back on the extras."
Even affluent shoppers, whose spending has rebounded, may bristle.
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