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Surging cotton costs have claimed yet another fashion victim.
Sneaker giant Nike missed Wall Street’s quarterly profit forecast for the first time in nearly five years, blaming lofty prices for cotton, oil and transportation — a shocker that sent investors sprinting yesterday.
Nike shares plunged more than 9 percent, and the news stoked concerns that rising costs for raw materials — especially cotton, which has seen prices soar 50 percent in 2001 — will continue to unravel results at apparel companies across the board.
In response to the crisis, Nike will “take more significant price increases” across a broader range of shoe and clothing styles, Chief Financial Officer Don Blair said on a conference call. The exec added, however, that the price hikes won’t happen until spring 2012. In the meantime, rising costs will continue to pummel the company’s profit margins.
Nike’s fiscal third-quarter profit rose 5.3 percent, to $523 million, but failed to keep up with the 7.3 percent rise in revenue. The results fell short of analysts’ estimates, and the company’s shares fell 9.2 percent to $77.59.
“I keep hoping cotton prices will go down, but I think they’re going to keep going up for the rest of the year,” said Ronnie Wrye, of Wrye’s Apparel, a T-shirt manufacturer based in Hahira, Ga.
The price of an unfinished T-shirt has risen by about 50 cents since last fall, and “we’ve had to eat about half of that,” Wrye told The Post. Wrye said his firm has seen competitors raise prices in recent months while laying off workers in a bid to stay afloat.
Indeed, looming price hikes likewise have cast “a pall of uncertainty” over the nation’s biggest specialty-apparel retailers, as many stores prepare to raise prices for the first time in 20 years, says John Morris, a retail analyst at BMO Capital Markets.
“Neither retail management nor investors know how this is going to play out, and are concerned that price hikes won’t stick,” Morris said.
Gap, Aeropostale and American Eagle Outfitters will likely be hit hard, as lackluster fashions and stiff competition sap their pricing power, according to the analyst. Meanwhile, Abercrombie & Fitch and Children’s Place have a better chance of successfully raising prices, he says.
This week, the government said clothing prices in February dropped 0.9 percent despite rising costs, reversing gains made in January.