Cotton hikes to hit Next clothes prices

5 November 2010

November 2010 | Helen Gilbert

High street chain Next has revealed it will have to consider alternative sourcing options and robust negotiation in order to combat the soaring cost of cotton.

The clothing retailer warned that clothes prices were likely to go up by as much as 8 per cent early next year as it reported its third quarter high street sales results, which showed a 3.3 per cent fall in like-for-like to the end of October.

In a statement, Next confirmed retail price rises are likely to be at the top end of its previous 5 per cent to 8 per cent forecast for the first quarter of next year.

“The longevity of what appears to be a speculative bubble in cotton prices will be critical in determining prices for the second quarter,” the statement read.

In September, SM reported how retail buyers were urged to factor in the cost of a living wage for workers in their price negotiations with garment suppliers when fears of a cotton shortage saw the price of the fibre rocket to $1/lb.

Tight supplies, in part caused by devastating floods in Pakistan, pushed cotton prices to their highest level since 1995.

Next chief executive Simon Wolfson said the company expected significant product cost price pressure from around the world to continue into 2011, adding that the cost of cotton had shot up by around 90 per cent on last year.

He said: “In addition, we are beginning to experience wage cost inflation in some overseas territories. Manufacturing capacity is also an issue in the territories where factories were closed at the height of the credit crunch.

“These cost increases combined with the impending rise in VAT will make price rises inevitable in the spring of next year. Next will be able to mitigate some pricing pressure through alternative sourcing, robust negotiation and some product engineering.”

A British Retail Consortium spokesman said: “If input costs keep going up they are going to put margins under greater pressure for retailers.”

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