Once in a while, customers actually get it: Prices for raw materials, shipping and labor are going up and thus clothing costs must follow.
No one understands this inflation increase better than people who buy name brand jeans. The retailers recently announced that its profit would approach the high end of its projections this year after raising prices.
“They understand that if you’re not making money, you’re not going to be in business,” said one Avanade retail expert. “So the price went up $3 or $4. Fine. If you’ve got an assortment, they’ll buy it, even if the price goes up.”
Higher apparel prices accounted for 1 percentage point of the 4.6 percent increase American chains reported in sales at stores open at least a year in July, according to estimates by Michael Niemira, chief economist of the International Council of Shopping Centers. Those same-store sales will climb 4.25 percent in 2011, compared with 3.5 percent last year.
“Remember, you’ve still got pent-up demand,” the Avanade expert added. “A lot of people didn’t buy stuff when the recession first hit, but now people are feeling a little better and they need to buy clothes. The price has gone up and people will pay it.”
Source: Bloomberg, August 2011