Apparel prices may fall only after February

Waiting for the price of the T-shirt you are eyeing to come down. It won’t be before February when the tag may come down, and that too a wee bit.

Despite prices of cotton and other fibres going in a free fall since April, apparel prices are unlikely to correct before February. And with the current excise duty on branded apparel, the relief, too, would be marginal.

Cotton prices have halved to `32,000 per candy since April when they were at a high of `62,000 while prices of other fibres such as viscose and polyester are also falling in tandem with cotton.

“The real benefit of reduction in cotton prices will not be evident in the end product before February 2012, it will reflect only in the range launched February 2012 onwards. The reason is that the fall in cotton prices has not translated into cheap fabric; we see this happening only in November-December. The fabric used at present has been procured at high prices,” said J Suresh, managing director- brand and retail, Arvind Ltd, which owns brands such as Excalibur Gant, Flying Machine and Arrow.

Amitabh Suri, chief operating officer, Indian Terrains, said the excise duty introduced in the last budget would prove a hindrance for any price cut in the end product. “Our company did not hike prices; in turn we took a hit on our profitability by absorbing the hike in cotton prices. We increased prices by around 10% due to the excise duty on branded apparels.” The government had imposed a 10% excise duty on readymade branded apparels in the last budget.

However, most expect this price cut in the end product to be marginal. “At an industry level, the price cut would be marginal as the value addition cost remains high,” said Ramesh Poddar, managing director, Siyaram Silk Mills, which owns brands like J Hampstead.

Apparel manufacturers, too, will have to wait for a couple of quarters more, before the cotton price correction eases margins.
“Margins for apparel companies continue to remain slightly under pressure due to a combination of excise duty and high cotton prices. We do not expect margins to improve before the fourth quarter of this fiscal. However, an improvement in March is also a welcome change, as we had budgeted on the basis that cotton prices will continue to remain high,” said J Suresh from Arvind Brands Ltd.