Already troubled by increased transit times, factory shutdowns and other rising costs across the supply chains, apparel brands have now being hit by 10-year high rise in cotton prices. Extreme weather, such as droughts and heat waves have wiped out cotton crops across the US. In India, a poor monsoon season threatens the country’s cotton output. According to Bureau of Labor Statistics’ Consumer Price Index, apparel prices have increased 4.2 per cent year over year as of August.
As per a pymnts.com report, though prices remain below the height of over $2 seen in 2011, companies are planning new strategies to offset the resultant losses. Last week, Levi Strauss & Co negotiated most of its product costs through the first half of 2022 at very low single-digit inflation. For the second half of the year, the company anticipates prices to rise by mid-single-digits. This can be offset by increasing product prices which the company already implemented earlier this year.
Other apparel brands are yet to comment on the rising cotton prices, But, many of them are expected announce their quarterly earnings in coming weeks. This will give investors and analysts a better sense of how they’re managing, though, analysts at Goldman Sachs say it may take a while for rising cotton costs to show up on retailers’ income statements, given the timing of contracted cotton purchases.