Fashion industry forced to raise prices to maintain margins

Wednesday, 11 August 2010

Yesterdays Index closed at 1065.6 points, after registering a drop of 4.05, and compared to Mondays 1069.65 points. Session has been characterized by moderation as most of values have more or less defended their previous day positions and registered light movements, normally not bigger than 0.5%.

Among the most outstanding performances were found Ted Baker, showing its British tailoring works, with a rise of 3.5 points, and ASOS, with a renewed impulse and 5 extra points. In the losses chapter there were the champions from past week, mainly JD Sports Fashion, with a drop of 34 points.

Fossil Inc. fell 1.1% just after climbing to $46.30 earlier, the highest intraday price since it went public in April 1993. The fashion watch and jewelry company forecast third-quarter profit beat average analyst estimations.

In the meanwhile, Hanesbrands Inc. closed 0.33% up. The maker of Playtex and Hanes underwear agreed to acquire GearCo Inc. for $55 million to add sales of collegiate-logo apparel and this operation has clearly passed the market test.

According to Reuters, and squeezed by ballooning raw material, labor and freight costs, manufacturers from Nike Inc and VF Corp to Hanesbrands Inc and Levi Strauss & Co are fretting they might have to raise prices in fragile markets to maintain margins. During the recession, many factories in China shut down as demand dropped. Now, decreased production capacity coupled with lower cotton output and higher prices of oil and labor are pressuring production costs. This implies, among other things, that price tags on everything from jeans to jumpsuits are likely to rise next year, ending about three years of serious discounting.


In accordance to American Apparel and Footwear Association (AAFA), which represents over 700 apparel companies, brands and suppliers, the increase in prices will by around 5 percent starting next year and will especially affect cotton-based products, although it is an overall trend.

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