Dow Jones Newswire reports that two apparel companies are planning to hike prices in response to higher commodity costs:
Jones Group Inc.’s (JNY) disappointing third-quarter results sparked a sell-off in the apparel sector Wednesday, as soaring raw material costs weighed on margins and sparked fears ahead of a slew of upcoming earnings reports in the group. Apparel makers and retailers had generally been optimistic about how they plan to mitigate rising raw materials costs. Cotton prices, for one, have repeatedly reset all-time highs in recent weeks as uncooperative weather in key cotton-producing regions has squeezed inventories since the beginning of the year But fears were stoked Wednesday after Jones Group’s margins contracted to 33.5% from 35.6% due to the higher costs. Cotton prices, meanwhile, hit an all-time record high of $1.305 a pound on Tuesday. Jones Group shares tumbled 22.6% to $15.10 in recent trading, dragging down other apparel stocks such as VF Corp. (VFC), Liz Claiborne Inc. (LIZ), Volcom Inc. (VLCM), Guess Inc. (GES) and Hanesbrands Inc. (HBI), all of which were down between 3.5% and 7% on higher-than-average trading volume… Jones Group Chief Executive Wesley Card said on a conference call that the company will look to offset the higher cotton costs by raising prices on its products–considered risky with continuing signs of belt-tightening among consumers. Similar concerns are haunting apparel company VF Corp. During its third-quarter earnings call last week, Chief Financial Officer Richard Shearer noted cotton prices are likely to rise to higher levels than the company envisioned, and it’s planning for selective price increases.
Jones Group has a bunch of brands I’ve never heard of. VF Corp. makes Lee and Wrangler Jeans.
Dr. Duru