California Apparel News

In the wake of a year-long price spike that nearly doubled the price of cotton, apparel manufacturers are facing a tough reality. “Prices aren’t going to return to the 66 cents they were one year ago—at least not in my lifetime,” said Bruce Berton of Roochi Traders, a Commerce, Calif.–based importer, wholesaler and distributor of private-label sportswear and activewear. That leaves brands selling everything from T-shirts and denim to casualwear and beyond scrambling to find ways to cope with the new higher cost of doing business.

“Apparel brands across the board are doing a lot of analysis. They’re looking at every potential component to help bring costs down,” said Paul Cavazos of New York–based Olah Inc., which represents textile and manufacturing companies and produces the Kingpins trade show. Whether that means culling the amount of cotton used to produce their goods and opting for alternative fiber blends, increasing wholesale prices, holding fabric orders in the hopes that the market stabilizes or abandoning cotton fabrics altogether depends on the company. “I’m not sure anyone has found the winning formula,” Cavazos said.

Kevin Na, owner of the Vernon, Calif.–based Naem Denim premium-denim brand, has so far been able to stave off wholesale-price increases by getting creative with washes. “We have made an effort to focus on getting more use out of the fabrics we buy into. As a result, we’ve had to get creative and derived more washes from each of the fabrics we stock. By limiting the number of fabrics we source, we feel we are in more control of the situation,” he said. Eventually, however, Na concedes the brand will be forced to raise its prices.

“This whole thing is a disaster,” said Jeff Shafer, owner of premium-denim and knits line Agave Denim. In April, Shafer said, increasing cotton prices had driven up the cost of producing each pair of jeans by $2 to $3, narrowing his margin. At the time, Shafer said, retailers wouldn’t accept wholesale-price increases. Now that cotton is trading at more than $1.42 a pound, Shafer said he can no longer absorb the ballooning production costs. At the upcoming Fall 2011 trade shows, buyers will find Agave’s prices have increased by 10 percent to 15 percent for denim and 15 percent to 20 percent for knits.

Shafer said he’s not sure how retailers will respond. “But at this point, with fabrics that were $4.50 per yard now selling at $7.50 per yard, there’s no way I can’t stand my ground,” he said. One shard of hope for Agave and brands like it, Shafer said, is that they’re operating in a luxury market. Shoppers at upscale retailers who value a brand’s story will, hopefully, not flinch at shelling out extra for a pair of jeans or T-shirt. “But it still isn’t going to be easy.”

Agave isn’t alone in increasing its prices. “Most of us [manufacturers] are raising our prices,” Roochi’s Berton said. Roochi will start by raising its prices by 15 percent, but Berton estimates some brands may see increases of 20 percent to 25 percent. “Everyone from Hanes through Affliction will be increasing their prices,” Berton said.

In an Oct. 28 earnings conference call, Delta Apparel’s Robert Humphreys said burgeoning cotton prices had pushed the company to plan price hikes for its catalog and private-label clothing. (The Greenville, S.C.–based international design, manufacturing, sourcing and marketing company owns FunTees Inc., Junk Food Clothing and sportswear maker MJ Soffe Co.)Looking for alternatives

In addition to raising prices, some manufacturers are looking to slash costs by using more synthetic or other cellulosic fibers in their garments.

“The demand for fabrics made from synthetic fibers and yarns has increased significantly,” said Brian Meck, vice president of sales and marketing at Fessler USA, an Orwigsburg, Penn.–based domestic manufacturer of private-label knits. David Sasso, vice president of international sales at Buhler Quality Yarns, agreed. “What I’m hearing from some retailers is they’re going to poly/cotton blends. Some spinners are putting more poly in the blend. It may be a 60/40, but in actuality it may be a 55/45,” he said. “Also, [some are] going to lighter-weight fabrics. The alternatives to cotton are poly/cotton, rayon/cotton, Tencel blends and Modal blends.”

Olah’s Cavazos said cotton is a key component for casualwear makers but that in recent years the segment has looked to bamboo, viscose and rayon. “Now that cotton is so expensive, that trend has accelerated.” Denim is experiencing a similar shift, he said. “Denim mills use alternative fibers regularly to help improve the hand and stretch.” Women’s jeans, in particular, lean heavily on synthetic fibers. Going forward, Cavazos said, brands, including men’s brands, could start to incorporate more synthetic fibers into their denim to help bring down costs but also to build a unique selling feature.Watching the cotton market

Even as the market continues to fluctuate and brands begin to shift their production strategies, talk of a potential cotton surplus is inspiring some manufacturers to take a wait-and-see approach.

Roochi’s Berton is watching the cotton market with the eye of an analyst—and he said the company is ready to respond with a dramatic shift in its sourcing and production if the fiber continues to trample its bottom line.

In December, the U.S. Department of Agriculture released its “U.S. and World Cotton Economic Outlook” report. According to the report, which was prepared by the National Cotton Council, the current U.S. crop is almost harvested and is estimated at 18.3 million bales—a third more than the previous year.

“In March we’ll know if we will have a domestic bumper crop,” Berton said. And, if so, prices may drop or stabilize. “Prices may go down to $1.18 to $1.20,” Berton guessed—which would represent a substantial savings from the current $1.42 price. Until then, Roochi is placing minimum orders for cotton fabric in the hopes that when the hoped-for bumper crop pushes cotton prices down, vendors will find themselves with a surplus of cotton and the manufacturer will be able to purchase fabric at a substantial savings.

Berton admits the move is a big gamble. In the meantime, Roochi is focusing more attention on poly-blend fleece items. And if the bumper crop or price drop doesn’t materialize, Berton said, Roochi will shift its product focus to polyester outerwear and significantly limit its T-shirt blanks business.

Buhler’s Sasso is less optimistic about a cotton surplus on the horizon. “The thing is, whether there is a bumper crop or not makes no difference whatsoever in the pricing. The bottom line is look at what you can count in inventory, what you can produce and consume, and what you speculate the demand will be,” he said. “The U.S. can make more cotton. The expectation is it’s going to increase by another 2.2 million bales this year. But we’re still running way behind global stock. As long as the demand is outpacing supply, prices are still going to remain high. It’s just simple mathematics. The best pricing [anyone is] going to get is what he buys right now.”

Regardless of whether cotton prices drop, Naem’s Na sees one bright spot. “In the end, the outcome will be that everyone’s product will evolve. The same old model no longer works, and everyone is trying new things. In a sense, because everyone is having the same problems and facing the same situation, there is more opportunity,” he said.