Consumers may be faced with rising clothing prices right as the holiday shopping season begins.
The U.S. is facing an uptick in cotton prices because of drought impacting production in the U.S., according to NRF’s chief economist Jack Kleinhenz.
It’s a repeated trend, according to Kleinhenz, who noted that cotton prices climbed a decade ago when “there was significant drought affecting world production.”
As a result, retailers were forced to use artificial fibers as a substitute for cotton, Kleinhenz said.
“Last time this happened it added about $1.50 to $2 to a cotton T-shirt,” he said, noting that “retailers will try to hold the line on higher prices so as not to lose the store sale.”
However, due to the spike in inflation across the board, that’s no longer the case, Brian Yarbrough, senior analyst of equity research for Edward Jones said.
Companies won’t be able to offset the costs like they once could, meaning consumers are going to feel the impact at the cash register – if not already, according to Yarbrough.
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“Unfortunately, right now for consumers … for retailers and manufacturers, this [rise in cotton prices] isn’t the only issue,” Yarbrough said.
He added that retailers are facing rising shipping costs and higher labor costs coupled with port delays.
“I think all those things are going to factor into higher prices for the consumer,” he said. “And we’re hearing this across all of our retail companies.”
In the past, companies have tried to cut costs by moving production overseas.
“They may raise prices a little bit, but now you’re seeing it in cotton, you’re seeing it in transportation, you’re seeing it in the supply chain, you’re seeing it in labor … so it’s pressure across the board,” Yarbrough said.
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With the mounting pressure, “retailers just don’t have enough ways to offset these price increases.”
On top of that, most retailers, due to supply chain problems and strong consumer demand, are “running awfully lean” on products which means consumers aren’t going to see much discounting, according to Yarbrough.
“Between that and rising prices, I think consumers are definitely going to feel the pinch of that when they get holiday shopping and moving to the next year,” he said.