"The Company's major suppliers announced price increases in January 2011 and again in late March 2011 or early April 2011 following three price increases announced from July 2010 through December 2010. Second quarter 2011 gross profit included no benefit resulting from apparel price increases. The Company increased its selling prices in response to each of the price increases from manufacturers. However, due to competitive factors, the Company did not raise selling prices on a per unit basis more than the Company's costs rose."
I point out above as a reminder that when cost of fiber, fabric, etc., increases, it is important to pass this cost along down the supply chain if at all possible. If your cost is up, most certainly try to increase the cost to your buyers. However, we obviously have to carefully weigh that decision. We certainly do not want to quote a buyer a price that is too high. It is very possible that they will find another company to meet their target pricing. Some times (not always), it is OK to shorten your own companies margin to get the buyers order. However, it is also important to walk away from an order if you are not going to make a profit.
In the 2nd quarter 2011 report they go on to state, "According to data provided by CREST, the U.S. imprintable activewear market shrank 9% in units sold during the second quarter 2011. The Company's units sold shrank by 11% during the period when using the comparable period used by CREST, which was April 1, 2011 through June 30, 2011. The Company's second quarter 2011 began March 27, 2011 and ended June 25, 2011."
I have highlighted above in bold that 9% of imprintable activewear market shrank in units sold as an indication of the overall market. This is NOT an indication specifically toward Broder Bros.
It is important to note that they have also announced a record second quarter results for its quarter ended June 25, 2011 (Adjusted EBITDA increased 93% from 2Q 2010). The Company also increased its Fiscal 2011 EBITDA guidance and announced that it has begun a series of initiatives in an effort to increase the liquidity in the Company's common stock
By the way, don't forget to keep on eye on cotton prices. As we saw in 2010-2011, we have had some very large cotton pricing swings up and down. As a matter of fact, it is a good idea to also track other textile fiber prices in addition to cotton. With the fluctuation of petroleum prices, polyester and other fabrics are effected.
WHAT DO YOU DO WHEN THE COST OF MANUFACTURING INCREASES? DO YOU INCREASE YOUR COST TO YOUR BUYERS? Let us know your thoughts in the comments section below.