Apparel Retailers Pass Rising Costs to Consumers

By Jim.Robinson|February 17, 2011

The rapid increase in cotton prices is causing profit margins to tighten at apparel stores, and retailers are beginning to pass the rising costs down to customers, according to The Bedford Report.

While consumer confidence is up and disposable incomes are filtering back into the apparel sector, cotton prices are continuing to grow to record levels. Retailers such as Abercrombie & Fitch have been hesitant to mark up prices with concerns that spending might slow down once again.

Abercrombie & Fitch’s comparable store sales decreased 4 percent year-over-year after the company saw a 95 percent increase in its fiscal fourth-quarter profit for 2010, largely due to its refusal to boost prices, according to the report.

The company, like many retailers, is expecting double-digit cost increases because of record-high cotton prices, according to Abercrombie & Fitch officials. To combat the increasing cost of raw materials, company executives indicated that their strategy going forward is to pass costs down to the consumer and accelerate growth internationally.