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Apparel Manufacturing Cost Increases Effect Buyer Prices

When the cost of fabric, trims, and labor increases, what have you been doing? 
  • Do you pass along the cost increase to your buyers?
  • Have your buyers walked away from you because of the increase your quoted?
  • Do you keep your buyer happy and reduce your own profit margin?
  • Here is portion of Broder Bros. Second Quarter 2011 earnings report.

"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

If you are interested, you can read the Broder Bros., second quarter 2011 earnings report at the Fashion Newspaper.

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.


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Comment by Ugenia Johnson on September 29, 2011 at 5:28pm
My thoughts is yes, as the designer, the crafter, the maker should past their off set costs to the buyer. Especially if the consumer is seeking out high quality merchandise and high quality craftmanship. Therefore, If I've purchase a lilly piece, I would expected it would be additional $20 bucks higher than two years ago.


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