One of the cheapest clothing brands raises its prices
From homes and cars to baby diapers and bacon, there’s not a single expense that hasn’t yet felt the price of inflation – and fast fashion, or £10 jeans and T-shirts. $ that many rely on to clothe their families, is one of the latest victims of rising material, shipping and labor costs.
Primark, the retail subsidiary of Associated British Foods (ASBFF) has long been associated with extremely low prices – a pair of jeans can to go for $20 when a sweater currently sells for $12. The brand, which started in Ireland, quickly expanded to the United States with nearly 60 stores.
Those cheap clothes are getting more and more expensive
Even though sales were up 59% in the quarter to March 5, Primark said it would need to raise prices to offset rising shipping and material costs. At 10%, the full-year operating budget will be lower than the 11.7% expected for the first half.
“With inflationary pressure mounting and the dollar strengthening, we will be implementing selective price increases on some of our fall/winter stocks,” ABF said on the April 26 earnings call.
The brand did not specify the amount of the price hike it planned to add or the types of clothing that would be most affected. Following NEXTa rival British fast fashion brand, had previously price increase 6.5% on average for fashion and 13% for household items.
“We will absolutely ensure that we get the best value for money, that won’t change,” said John Benson, Primark’s chief financial officer, Told Reuters.
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Primark pledged not to implement the increases for current spring/summer stock, but did not say whether all autumn/winter stock would be affected.
How bad is inflation really?
The reason for the increases has a lot to do with runaway inflation – prices rose 7.9% overall in March, a 40-year high, while many materials used in the manufacture of clothing and household hardware were even more prone to increases.
Data from the Labor Department shows that the costs of clothing and footwear rose 6.8% from a year ago.
This can mean hardship for consumers, especially those who already rely on the cheapest food or clothing available to make ends meet. Stores offering the cheapest option saw the most dramatic price increases.
Grocery costs at dollar stores increased 14.3% from 2021 and 22.5% from 2020, while traffic at Family Dollar and Dollar General (CEO) – Get the Dollar General Corporation report increased by 20.4% and 28.2% respectively since 2019. Dollar Tree (LTRD) – Get the report from Dollar Tree, Inc. in January, most of its prices increased by 25%, from $1 to $1.25, in all of its stores. In other words, many people rely on these low-cost stores to get their essentials, but seeing that their dollar also extends less far there.
As such increases hit the industry fairly evenly, the price increases are unlikely to affect Primark’s sales much, as it remains one of the cheapest clothing options on the market. That said, ABF stock fell almost 8% after the earnings call.
“Primark will have to face higher costs, for example in cotton and energy, while respecting its commitment not to increase prices”, Andrea Felsted recently wrote for Bloomberg. “[…] He also risks being caught in other crosshairs, from the rise of Shein Group Inc., which is making fashion even faster, to heightened environmental awareness, which could see young people shy away from more disposable clothes.”