Northeast Creations Blog

Cotton Tale: Apparel Prices Set to Rise

2010-08-17T07:16:00.000-07:00

By ELIZABETH HOLMES And RACHEL DODES

After a decade of deflation, the cost of producing apparel is on the rise.

Prices for cotton are up about 55% from a year earlier, and costs are rising for other raw materials as well as transportation and labor. Recession-scarred retailers, which have only recently recouped their profit margins, will try to pass at least some of the price increase along to shoppers.

"We are facing a very serious problem in terms of increased cotton prices," Abercrombie & Fitch Co. Chief Executive Michael Jeffries said Tuesday. The increases are making it harder for the high-priced teen retailer to restore margins already eroded by steep markdowns and depressed sales.

Intimate-apparel maker Maidenform Brands Inc. says it is seeing rising fuel costs that affect not only what it spends on transportation, but also the price of the petroleum-based synthetic materials that it uses for many of its products.

"The reality is that there will be some price increases," Chief Executive Maurice Reznik said in an interview. The company will likely try to tuck them into bigger-ticket items such as shapewear. The price of a $38 shaping top might rise by $2 to $3, Mr. Reznik said.

The rising costs come as better inventory control has given retailers a measure of pricing power. Once ubiquitous deep discounts are harder to find, and consumers already are shelling out more for clothing. An index measuring the price consumers pay for apparel rose 1% in 2009, the first increase in more than a decade and the biggest year over year jump since 1993, according to the Bureau of Labor Statistics.

"We're not going to see this ongoing decline in costs, this ongoing margin expansion for retailers and this ongoing savings for the consumer," says Richard Jaffe, a retail analyst at Stifel Nicolaus.

Raw materials account for between a quarter and half of the cost of producing a garment, says Andrew Jassin, managing director of retail consultant Jassin-O'Rourke Group LLC.

Cotton prices increased to more than 88 cents a pound in April, up 55% from a year earlier and higher than they got during the commodities boom last decade, according to trade publisher Cotlook Ltd.'s 'A' index, a proxy for the world price of cotton. The index stood at 89.80 cents Tuesday.

The spike in cotton prices is partly attributable to a drop in production, says Mr. Jassin. As apparel demand fell in the recession, some farmers switched to crops such as soybeans.

Mother Nature is also a culprit. Severe weather in China, the world's largest producer of cotton, has damaged the quantity and quality of the country's crop, says Rob Samuels, senior retail analyst on the equity sales and trading team of Phoenix Partners Group. Some Chinese factories will now have to purchase cotton yarn from other countries, which will translate into rising costs, Mr. Samuels says.

Companies such as Hanesbrands Inc. sometimes hedge cotton, because it's a big part of their costs, but most companies don't, as they use a mix of fabrics, Mr. Jassin says.

With consumers still stressed, companies aren't going to be able to pass along all of their higher costs. Liz Claiborne Inc. earlier this month cut its 2010 gross profit margin forecast, saying it would widen only by five percentage points instead of a previously estimated six, citing cotton prices as well as higher labor and transport costs.

"We are starting to see real second-half sourcing inflation," Claiborne's Chief Financial Officer Andrew Warren said on a May 6 conference call.

Wesley Card, chief executive of Jones Apparel Group Inc., said recently that the company has been buying raw materials such as cotton and leather early with the expectation prices will rise. He also said price increases are likely in the fourth quarter.

At Jones, whose many apparel labels include Jones New York and Anne Klein, incremental price increases will likely come on higher-ticket, more fashionable items, such as embellished shoes and dresses, instead of price-driven basics, such as plain T-shirts and sweaters, Mr. Card said.

Many manufacturers and retailers, including J.C. Penney Co., are changing the blend of their materials to keep costs down. Other companies are looking to lower cost producers outside China. Maidenform this year began moving some of its sourcing to Bangladesh, but is going slow until it gets more confident about the quality of the work.

Corrections & Amplifications

Cotton prices were up about 55% in mid-May from a year earlier. A photo caption accompanying an earlier version of this article incorrectly said cotton prices were about 70% higher.

The $43,000 Pen

2009-10-12T08:50:00.000-07:00

Patrick Leahy knows the story sounds unbelievable, but it is true.

A personal injury attorney from Tacoma, WA, Leahy first ordered pens to promote his firm several years ago. He does no other advertising, doesn't even have a website. Just orders pens and an occasional stress ball.

Leahy gave the pens out to clients and prospective clients. Somehow, one of those pens ended up on the counter of a local bank. "A woman who had recently been in a car accident saw the pen" Leahy remembers. "She was a religious woman and she felt the pen was a sign she should call me."

Leahy took the case and a third of the $27,500 verdict. But there's more to the story. A little while after this case, this same woman's cousin was involved in a car accident too. "She referred him to me.... The settlement was $25,000."

In just two cases, one pen brought Leahy $17,000 worth of business. But there's still more. "Turns out that same guy moved to Yakima and was in another accident," Leahy recalls. "We got an $80,000 settlement from that one. So the pen brought $43,000 in fees."

Needless to say, Leahy has continued to order pens. "It just shows you the value of a promotional product."

Vagoni, D. (2009, October). Magazine articles in APA format. Counselor, 78-82.

Eco-Jackets

2009-06-29T12:31:00.000-07:00

Happy Rainy Monday!

With all the rain we've been getting lately, I have (unfortunately) been keeping a coat by my side at all times.

I am lucky enough that we have a pretty lenient dress code here at NEC. Of course we dress appropriately for meetings, but when we are not on the road most of us are in casual clothes and flip flops.

I have noticed that companies have loosened up there dress codes as well; Casual Friday are now pretty standard across the board. Now my clients are able to wear more casual - dare I say - fashionable jackets and apparel to work.

A few "eco-jackets" that caught my eye are from our Boardroom Collection ( check them out on our website) The Ladies Stow-Away, the Men's Straight Cut Jacket and the Men's Plasma Schell Jacket are 3 "green" options that are made of 100% recycled polyester (post-consumer recycled plastics).

Price points vary by style, but if it's outerwear that you are thinking about ordering for a company outing or as an employee gift, you are sure to find great ideas on our website.

As always, feel free to contact Beth or Allyson directly if you have any questions or need new ideas! 603-964-6840.

Stay dry!

Allyson

Summer Green Ideas

2009-06-15T07:27:00.000-07:00

Welcome to the first blog for Northeast Creations!

Beth, Rachel and I decided it would be fun to blog every couple weeks about new promotional ideas (both green and traditional) as well as ideas about how to become more Environmentally Friendly at work and at home.

Hopefully these blogs will pique your interest and give you new ideas on how to become more green in your home and work life too!

A couple of unique products that I have come across and thought, "Hey, I'd use that!" is an imprintable gardening kit with work gloves, a trowel, weed puller and more, a very cute customizable straw hat (think Aussie style, fedoras and bucket styles), and a logoed Home Conservation Kit that includes a water timer, fluorescent light bulb and a Eco-Home converse booklet. ( You can search for all of these green ideas and more on our website, http://www.necreations.com/. )

These ideas are great promotional products for companies large and small because they are items that people actually want, will take home and use and will show their friends. With so many current and potentially new customers making the shift toward being more conscious about the Earth, it makes sense to give them tools to help them out... of course with your logo on them!

I hope to pour over my promotional item and imprintable apparel catalogs this week so I will have new ideas to share in my next blog.

Of course, if you have any questions feel free to contact Beth or Allyson directly at 603-964-6840 or email beth@necreations.com or amoreau@necreations.com.

Have a great week!

Allyson