NEW YORK (Reuters) - U.S. consumers, who are now paying more for everything from airline tickets to bagels, may soon notice that prices for their shoes are rising more quickly than prices for their clothes.
That is partly because most shoes sold in the United States are made in China, where fuel and labor costs are soaring, forcing manufacturers to pass on higher prices to consumers. By contrast, apparel production is spread around the world, giving companies more options for lower-cost labor.
Executives gathered this week in New York for the Reuters Consumer and Retail Summit said they were exploring new markets for their factories as they seek to lower manufacturing and shipping costs.
Footwear factories, which have a lot of highly engineered equipment, are hard to relocate, said Wesley Card, chief executive of Jones Apparel Group Inc (JNY.N: Quote, Profile, Research, Stock Buzz).
"They are moving more toward the north (of China) where they can, and doing everything they can to offset" rising wage rates and energy costs, Card said. But, he added: "I don't see any major shifts in where footwear is manufactured. There's a little bit of broadening, but not a lot. They're just not easy factories to pick up and move."
"I think next year we're going to start to see some low-single-digit price increases in footwear and accessories," said Card, whose company sells shoes under brands including Nine West and Easy Spirit.
While as much as 95 percent of all shoes sold in the United States are made in China, only about 35 to 40 percent of apparel is made there, Card said.
APPAREL MAKERS "FORTUNATE"
"We believe shoe retail prices will go up in '09. I don't think we can avoid that," said David Levin, chief executive of Casual Male Retail Group Inc (CMRG.O: Quote, Profile, Research, Stock Buzz), which just launched a website specializing in shoes for big and tall men.
Regarding apparel prices: "We don't see anything out there yet that's indicating that our retails are going to have to go up. We've been fortunate," he said.
Levin said that Casual Male, which runs the Casual Male XL and Rochester Big and Tall chains, "moves fluently" to different countries, since it doesn't actually own any of its factories. He said it sources from many countries including Vietnam, Pakistan and the Dominican Republic.
"We're all over. We're looking at Egypt right now ... we're constantly looking to protect our prices," Levin said.
Perry Ellis International Inc (PERY.O: Quote, Profile, Research, Stock Buzz), which is known for its mens' clothing, attributed a 0.72 percentage point increase in its gross margin in the first quarter to the flexibility it had to place its orders in different factories around the world.
Francisco Gonzalez-Meza Hoffmann, vice president of strategic initiatives, said the company has shifted some production over the last year out of China into other places.
"If last year we were 30 percent of our production in China, this year we have put it down to 26 percent. Jordan last year, for example, was less than 5 percent of our production. This year it's 11 percent of our production," he said. Continued...
© Thomson Reuters 2009. All rights reserved.
| Health | Nov 09 - 12, 2009 | Health |
| Autos | Nov 02 - 4, 2009 | Autos |
| Middle East Investment | Oct 26 - 28, 2009 | Country Summits |
| Washington | Oct 19 - 21, 2009 | Country Summits |
| Global Wealth Management | Oct 05 - 7, 2009 | Financial Services / Exchanges |
