Cotton Prices Dip Sharply Downward
In the last five months, cotton prices have tumbled by more than 50 percent, giving manufacturers hope that the hot cotton market is cooling off.
But retail analyst Adrienne Tennant, who closely follows the industry as managing director of softline retail and specialty apparel at Janney Capital Markets in Philadelphia, noted that manufacturers won't be out of the cotton fields until cotton prices decline on a year-over-year basis.
quot;We point out cotton is still higher than a year ago, when it was in the 70-cent-a-pound range,quot; she wrote in a report to clients. quot;With this recent drop, we believe the headwind is on its way to becoming a neutral impact earlier than we had thought. It is not until cotton actually trends lower year-on-year that it would actually become a tailwind.quot;
She noted that apparel retailers usually have a nine-month lead time on delivered goods. quot;Once cotton crosses itself on a year-over-year basis, we should see stabilization in initial markup trends nine months out,quot; she wrote.
She said that at the current levels, with cotton plummeting from $2.20 a pound in March to the current $1 a pound, cotton should meet last year's prices some time in September or October this year. quot;If the current trends continue, initial markup pressure from costs could stabilize as early as mid-2012 deliveries,quot; she wrote.—Deborah Belgum
