Cost Pressures Lead To Collective Price Rises In Garment Industry

Sports in 2010

In 2011, in the face of high cost, the Lining plan "increased the price to two digits."

In Lining's 2010 earnings report, the gross profit margin was 4 billion 482 million yuan, and the gross profit margin of 47.3% was the same as that in 2009.

Lining has predicted the impact of rising costs.

In its earnings report, it is clear that gross margin will drop by one percentage point in 2011.

It is also clear that the international sports brand Nike has made clear the price increase, and its executives have clearly pointed out that the pressure to relieve rising costs depends only on raising prices.

A Nike counters in Beijing said that sales staff salaries did not rise, but the price of products did rise over last year, with a pair of trousers as an example, at least up to tens of dollars.

The price of Nike has been adjusted substantially.

It is not uncommon for different brands to raise prices annually, but collective price increases are rare.

Cost pressures lead to inflation

Upstream suppliers' raw material cost is a major part of the cost, and the raw materials used by garment enterprises are almost always reserves at high price.

Xu Zhida, chief operating officer of PEAK group (hereinafter referred to as PEAK), said, "the proportion of fabric cost in the whole cost is 60%, while the total cost is 40%.

In March, the price of cotton yarn increased by 80% compared with the same period last year, polyester fiber increased by 20%, and the supply cost of raw materials increased by an average of 15% in 2011. The retail price will also vary according to the different categories of shoes and clothing.

PEAK's price increase will be reflected in its upcoming fourth quarter order meeting.

Xu Zhida said, "the price of this product to the agent should be increased from 10% to 15%.

The price of footwear is about 10%, and clothing is 15%.

Hongxing Erke, which has already been listed, has also planned to raise its price.

"We plan to increase the price from 15% to 18% this year."

Its insiders said.

In their view, the rise of raw materials such as oil and rubber will lead to an increase of about 20% in cost, and only to reduce costs as much as possible.

Anta Sports Products Limited (hereinafter referred to as "Anta"), general manager of enterprise public relations, Li Hao also said that Anta will adjust with the industry trend, and the increase is not yet determined.

It is reported that Anta and 361 degrees will increase the selling price of footwear products, with an average increase of about 10%.

In Anta's 2010 earnings report, the impact of cost increases has been reflected.

As of December 31, 2010, the cost of footwear increased by 3.6%, and clothing cost was 5.7%.

The increase in the cost of shoes and clothing made Anta self production, subcontracting production and outsourcing production costs rise 7%, 7.7% and 38.4% respectively over the same period in 2010.

Besides the rising factor of raw materials, the high cost of brand promotion or the rise of brand price is another factor.

All brands are investing more in promotion.

In Lining's 2010 earnings report, the overall distribution cost in 2010 was 2 billion 511 million, accounting for 26.5% of the group's total revenue, while in 2009 it was 25.7%.

In 2011, the proportion of advertising sales promotion expenses planned by Lining will increase by about 2 percentage points.

The growth of brand promotion costs is also more than Lining's. Anta, PEAK and 361 degrees also sponsor different competitions to expand their influence.

PEAK's advertising and promotion expenses in 2010 were 11.3% of sales revenue, compared with 7.5% in 2009.

The brand war has shifted from product functionality to product added value.

Some enterprises will be affected.

The rise of raw materials for large enterprises, "go in and out."

Xu Zhida said.

Xu Zhida calculated an account. If the cost of a garment rises before 100 yuan, the retail price will be 400 yuan. After the rise, the cost will be 120 yuan, and the retail price will generally rise 15% to 20%. It may reach 480 yuan and sell more than 60 yuan in retail sales.

According to the relevant enterprises, the order volume of the enterprises is not affected by the increase in prices, but also goes up.

But an industry insider said that the increase in the number of stores or the increase in the quantity of orders, and the cost of rent, labor costs and raw materials costs will affect the net profit in 2011.

And the rising cost of raw materials has a relatively small impact on enterprises with upstream and downstream industries. Similar enterprises with fabric production and clothing production will have less impact on YOUNGOR, which will have a greater impact on the pure retail "Light Companies" and outsourced and sub contracted businesses.

Hongxing Erke also said that the cost of a garment is 20% to 30%, to the distributor is about 60 percent off, when the normal sale of new products is the lowest 15% off, even if the discount sales will have 35% off or 30 percent off price; while the cost increases, the sales price will naturally increase.

But for some smaller brands with weaker influence, the cost increase is enough to kill.

An industry insider told reporters that some small brands that originally survived in the three or four tier cities rely on price to attract people. But after the rising cost of raw materials, brand acceptance will be tested for famous brands such as Nike and Adidas. For small businesses that rely on price, market will be even more difficult.

"The small garment enterprises in Fujian have been affected."

Xu Zhida said, "rising costs will clean a small number of brands."

Related reports: cotton price or fall

Many garment enterprises regard the rising cost of raw materials as an important factor in price rise.

As the main raw material, cotton has been rising all the way since the middle of 2010, which is twice as high as that of the same period last year.

Tang Yu, a researcher at the mid term Research Institute, said.

In February 18th this year, cotton futures prices once reached the highest level of 34500 yuan per ton. After that, although there were fluctuations, they were generally downward. In March 22nd, the cotton futures price of the Zhengzhou Mercantile Exchange was 30295 yuan per ton, down 0.44% from the previous day.

Unlike some analysts who are bullish, Tang Yu said that "this year's cotton shortage will be eased, prices will fall and it is impossible to go back to high places".

The shortage of cotton and soaring prices in July and August last year seemed to be an extreme phenomenon in Tang Yu's view, a "sequela" in 2008.

In 2008, the textile industry was affected by the economic crisis. At that time, the cotton purchase and storage price was only 11 thousand yuan, and the enthusiasm of cotton growers was affected. There was no prediction that the economic recovery would be fast. In 2009, the cotton planting area decreased and output shrank.

Because the planting period of cotton is from April to October. Although the sowing rate is increased in 2010 and the yield in 2009 is low, it is natural that there will be shortage and price increase in July and August when cotton is in the blue.

However, this situation improved in 2010. In the Research Report of Beijing Eastern agrie Agricultural Consulting Co., Ltd. in December 2010, it was pointed out that the cotton harvest area in 2010 was 5 million 400 thousand hectares, the total output was 7 million 315 thousand tons, while the consumption was expected to be 10 million 950 thousand tons, with an estimated import of 3 million 600 thousand tons.

For the current "lack of raw materials" argument, Tang Yu does not think it exists.

According to its estimate, the current gap is 3 million tons to 4 million tons, "since China's accession to the WTO, cotton has gaps every year, China will import every year, mainly in the first half of the United States cotton, the main use of cotton in the second half of the year, after October, the new cotton market in India, in the market regulation, cotton prices will fall naturally."

Cotton growers will also increase their sowing area in April this year due to the continuous rise in cotton prices.

According to Edgar Iger, the domestic cotton sown area will exceed 5 million 830 thousand hectares in 2011/12, and the output is expected to reach 8 million tons.

Integrating domestic and foreign factors, Tang Yu believes cotton supply and demand will not be abnormal, and prices will not fluctuate substantially.

What worries them is the impact of inflation.

"The rise in the prices of downstream consumer goods is likely to lead to a lack of consumption. This trend has already appeared."

Tang Yu believes that lower consumption will naturally lead to lower prices of upstream raw materials.

"The rising price is the downstream demand for the upstream industry. If the demand is gone, who will sell the upstream raw materials?"

And the coming April and May will also be the usual time for raw materials traders to repay their loans.

Traders purchase cotton mostly from bank loans until March next year after the peak season repayment, "immediately into the repayment period, traders will not hoard goods and repayment risk.

So the price will be lowered.

Tang Yu said, "but futures should be maintained at 25000 yuan per ton! Spot may reach 27000 yuan."

For cotton farmers, such prices are higher than in previous years, and will not affect the enthusiasm of planting in the coming year.