Cotton crisis sends prices soaring

HACKENSACK, N.J. -- Price surges in cotton and other fabrics have retailers and manufacturers feeling stretched, and facing a tough choice: Pass higher costs along to their customers or absorb them, thus cutting into profit margins.

So far, consumers haven't really felt the impact of cotton prices that have jumped more than 130 percent in a year to the highest prices per pound since the Civil War, but retailers and manufacturers say that probably will change when fall merchandise begins arriving in stores.

A decrease in the cotton supply because of poor crops and reduced planting in response to the recession, rising labor costs in China and India, and renewed demand for apparel as the economy recovers, have combined to make cotton a hot commodity.

"I'm getting calls all the time -- 'You got any cotton? You still have that cotton?' " said Danny Letzt, co-owner of Les Tout Petits, a children's clothing maker in Ridgefield.

Letzt has a "long" position in cotton, with several dozen rolls of fabric he stocked up on in the past and is selling to other manufacturers searching for the fabric. "It's like having cash," he said. "It used to be that you couldn't give it away."

Les Tout Petits has cotton to spare in part because it has shifted its fashion line a bit away from more casual, cotton T-shirts and toward dresses and party clothes that use polyester blends, sequins or other specialty fabrics.

But the cotton shortage has driven up demand for other fabrics as well, and Les Tout Petits recently learned it couldn't get a fabric it needed for one of its designs. It's also been hit with price increases for polyesters as well as for cotton.

Lois Letzt, Danny's wife and business partner, designs the Les Tout Petits fashions sold in trendy boutiques in Manhattan and throughout the country and have been worn by the Obama daughters. She said the company is trying to cut its costs rather than pass price increases on to retailers. Consumers will pay extra for special-occasion outfits, such as party dresses, but not for basic staples, a retail fact of life pushing her to focus more on special-occasion clothes, she said.

This month and next are when retailers head for trade shows to view fashions and place orders for fall, and store owners say they're already seeing the impact of the cotton-price surge.

Joyce Hamrah, co-owner of Hamrah's, an upscale women's clothing store in Cresskill, N.J., toured designer showrooms last week and saw cotton shirts priced at $400 to $500 that would have been $300 a year ago.

The manufacturers "tell you this is the price, and we have to decide what we want to do in the way of buying it or not," Hamrah said.

The store's buyers are shopping around more to find in-demand fashions at good quality at the best prices. "For a basic shirt, or something that's simple, $500 is a lot of money," she said.

Although Hamrah's is coming off a good 2010, according to its owners, and its customers are buying enthusiastically, Hamrah said the store is not going to assume it can pass along price increases. "Any retailer with a little common sense is going to watch it," because even affluent customers want to get a good value for their dollar.

Anna Anagnos, owner of the Eat Your Spinach children's boutique in Ridgewood, said she hasn't yet seen price increases from manufacturers, because her current inventory was ordered last year. "But what happens for back-to-school we don't know," she said.

Anagnos sells clothes by appointment to customers who want special-occasion gifts for granddaughters and nieces, and those customers are less likely to balk at price.

Audrey Storch, whose Wayne-based company Hugs To Go LLC sells dolls made of 100 percent cotton fabric, said her prices for supplies are up 30 percent over last year. She was in China in November to source fabric and said it was clear price increases for consumers are inevitable. Still, she said, she is reluctant to raise prices because that might affect the number of dolls she sells. "I've become very inventive and creative in cutting my costs here," she said.

The cotton price issue was triggered by the financial crisis and recession, said Ram Sareen, chief executive officer of Tukatech, a Los Angeles-based company that helps clothing manufacturers reduce fabric waste through computer software and other technologies.

"When farmers saw the demand for clothing going down, they did not plant the crops," he said. "The actual drop in sales was less than 14 percent, but the brands and retailers started cutting the inventory and they reduced the buying by 40 percent."

Analysts are predicting clothing prices will rise 10 percent in the fall. Sareen, however, said increases ultimately could be even higher. "The problem is really going to surface when they start finding out that the 10 percent increase is not going to solve the pricing problem," he said.

The price increases have some merchants watching cotton prices the way investors watch the stock market. "All my suppliers are telling me they're not even putting out price lists anymore," said Frank Frisina, owner of Windjammer T-Shirts, a Long Island company that sells custom-printed shirts to schools and organizations. "What you do is you go online in the morning and you find out what the price is that day," and then decide if you want to place an order, he said.

(Source: http://staugustine.com/national-news/2011-02-26/cotton-crisis-sends-prices-soaring)