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Nov. 16 (Bloomberg) -- Gap Inc., J.C. Penney Co. and other U.S. retailers may have to pay Chinese suppliers as much as 30 percent more for clothes as surging cotton prices boost costs.
“It’s a little terrifying to deal with cotton suppliers now,” said Vicky Wu, a sales manager at Suzhou Unitedtex Enterprise Ltd., a closely held, Jiangsu province-based clothes maker that counts Gap and J.C. Penney among its clients.
Cotton futures in China have surged more than 70 percent this year and were at a record earlier as the global economy emerged from recession, allowing people to spend more on clothes. Production of the fiber in China, the world’s biggest user and importer, is forecast to lag behind demand for a 12th year, cutting its stockpile to the smallest since 1995, according to the U.S. Department of Agriculture.
“American consumers better get used to rising prices on the shelves of Wal-Mart and other retailers,” said Jessica Lo, Shanghai-based managing director at China Market Research Group. “China’s manufacturers are getting squeezed not only by rising cotton costs but also soaring real estate and labor costs.”
John Ermatinger, Gap’s Asia president, declined to say whether it would raise prices. “We are going to be mindful of our competition,” he said in a Nov. 10 interview in Shanghai. “We are going to be mindful of our consumer. That’s how we’ll ultimately establish our prices.”
Shandong Zaozhuang Tianlong Knitting Co., which makes Polo Ralph Lauren Corp. T-shirts and track suits for Le Coq Sportif Holding SA, has raised prices as much as 70 percent from a year earlier, said sales manager Fred Hu. “If cotton keeps rising like this, we will need to lift prices by 30 percent by the Spring Festival next year or we lose money.” Complete Bloomberg Article