Apparel makers, retailers plan to cut prices by 15%

Even as headline inflation is steadily climbing, apparel shoppers can now see some signs of respite.

Apparel manufacturers and retailers plan to cut merchandise prices for the upcoming spring-summer season, which starts in February, by 10 to 15 per cent. The reason: A drop in sales and a correction in raw material (cotton) prices.

Apparel manufacturers and retailers such as Pantaloon Retail and Shoppers Stop had increased prices by 8 to 18 per cent, owing to an increase in excise duty and rise in cotton prices. Retail companies had seen a fall of two per cent in net profits during the first quarter of 2011-12 due to lower volumes and declining same-store sales growth, after the rise in apparel prices and softening in consumer demand.

In the last Budget, the government had imposed a 10 per cent excise duty on branded apparel, which had forced manufacturers and retailers to increase prices.

Similarly, cotton prices have declined by almost 50 per cent in the last eight months. Cotton prices crashed from Rs 63,000 a candy to the current price of Rs 39,300 a candy.

“We have to factor in the fall in raw material prices in our finished products, as we have to keep up with our competitors. We plan to reduce prices in our products for the spring summer collection,” said Reshabh Raizada, president of Alok H&A, a unit of Mumbai-based textile major, Alok Industries.

“A real fall in apparel prices would be seen in spring-summer 2012, since then, apparel manufacturers would factor in the fall in raw material prices,” adds Rahul Mehta, president, Clothing Manufacturers Association of India. Mehta expects a fall of 10 per cent in prices.

Some, like apparel maker and retailer Provogue, have already decreased prices by 12-15 per cent following the decline in cotton prices.

However, Arvind Singhal, chairman of retail consultancy Technopak Advisors, believes the plans to cut prices has more to do with the fall in consumer demand than the correction in cotton prices. “Consumer sales are down, and if they want to maintain sales, they have to cut prices. Even Diwali sales have not turned out as expected,” he says.

CMAI's Mehta agrees. “Higher apparel prices have not been received well by consumers, and since raw material prices have fallen, manufacturers and retailers have to reduce the prices of finished products," he adds.