Rising cotton cost compel Indian fashion retailers to hike apparel prices
06 May 2022, Mumbai:
The uncontrolled rise in cotton prices for the last one year is compelling most fashion retailers like Shoppers Stop, Celio, and Arvind Fashions to increase apparel prices.
Despite efforts to be cost-efficient, retailers have not been able to absorb the entire surge in input costs, says Kulin Lalbhai, Director, Arvind Fashions and Executive Director, Arvind Limited.
Menswear Celio has revealed plans to increase the prices of the upcoming winter collection. As per Satyen Momaya, CEO prices are expected to go up around 6 percent.
Other apparel retailers too are following the same track of hiking prices by around 5-15 percent. Departmental-store chain Shoppers Stop pushed up prices by 10-12 percent and plans further hikes to control rising inputs costs, indicates Venu Nair, the Managing Director, and CEO.
Demand in the value segment gets affected
Cotton forms 50 percent of the materials used to make casual wear items like denim. Other clothing products such as T-shirts also contain 40-50 percent cotton. A surge in cotton prices affects the profit margins of all these products.
And as Nair points out, even though the price hike has not affected demand for new apparel in India, demand in the value segment has declined.
Price rise fuelled by a decline in end stocks
The rise in cotton prices, over the last year is attributed to tight global supplies and increasing demand in international markets. The hike has been a cause of concern for most fashion retailers in India Reaching its peak, cotton futures price on the Intercontinental Exchange (ICE) has surpassed $1.5 per pound, reveals Crisil data.
Average cotton prices in India have increased 45 percent Y-o-Y to reach Rs 8,220 per quintal compared to Rs 5,728 per quintal last year. Pushan Sharma, Director, CRISIL Research opines, that one of the main reasons for the increase in cotton prices is the estimated decline in end stock at both global and national levels.
As per the United States, Department of Agriculture (USDA) estimates, global end stocks will decline by around 7 percent in 2021-22. The Cotton Corporation of India estimates cotton end stock in India will fall 36 percent to 45.46 lakh bales in 2021-22.
In the 2021-22 season-spanning October-September, international cotton prices increased 150 cents per pound as against 85 cents per pound in the previous season.
The increase is attributed to declining in the output of key producers, including China and West Texas; supply-chain hurdles, and restrictions on China’s Xinjiang cotton by Western countries among others. v Sustained demand to boost prices further
The reopening of economies is sustaining cotton demand despite constrained supplies.
This is adding more pressure on cotton prices that have been rising uncontrollably since the last year, affirms Rajani Sinha, Chief Economist, CareEdge. While Indian apparel makers continue to battle high cotton prices, exporters plan to boost global cotton supplies.
This is likely to fuel further the price rise of the commodity.
To control the hike, the government is toying with the idea of banning cotton exports temporarily.
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