Seems like only yesterday when cotton prices were soaring, and retailers were stuck having to either jack up their own prices or eat into their profits. Now that lower demand has brought down commodity prices big time, those same retailers are wondering what to do. "There's never been this kind of volatility in cotton--ever," VF Corp. CEO Eric Wiseman told the WSJ.
Brands that specialize in value-priced, cotton merchandise like T-shirts and jeans are the most vulnerable to price volatility because raw material costs make up a greater percentage of their total cost. The pressure is particularly acute for underwear makers, including Hanesbrands Inc., Fruit of the Loom Inc. and Jockey International Inc. Hanesbrands has raised prices already this year and plans to do so again in the fourth quarter. Chief Executive Rich Noll said the company is in talks with its retailers on how to handle pricing for the second half of 2012. One likely option would be to increase the number of items in a package--adding a pair of underwear, for example--while keeping the higher ticket price. "In essence, you have offset the fact that cotton has come down," Mr. Noll said.