Global demand for cotton means fashion retailer Giordano will have to raise prices by up to 15 per cent.
Giordano fashion costs to tighten with cotton prices
The fashion retailer Giordano, which has more than 170 stores across the Gulf, will need to raise prices by up to 15 per cent for its autumn collection next year because of sharply rising cotton prices on world markets.
Ishwar Chugani, the regional executive director of Giordano Fashions, said that the group bought its stock for the spring collection at least six months ago, before the cotton price rally, but that consumers would feel the pinch by the end of next year.
"Every retailer will have to increase prices. Cotton prices are hitting the roof," he said. "[They] are up by about 70 per cent, and it's going to be a challenge … That's why Giordano as a group is looking to see the best way to handle this."
Cotton prices have jumped more than 70 per cent in the first 10 months of this year, reaching a 15-year high above US$1 a pound this month.
The price has been driven up by a surge in global demand, particularly in China and India. Meanwhile, major producers such as the US and China have planted less cotton and used the land for other crops. Other big brands, such as Gap and New Look, also say they will need to raise prices.
Giordano, which has more than 2,000 stores worldwide, is also looking to move its production facilities away from China because of rising wages, Mr Chugani said.
The added challenges come amid recovery in the regional market, where sales for the year to the end of October are up 18 per cent compared with the same period last year, Mr Chugani said. Sales in the first half of this year were dire, with "double-digit negative growth" after a 35 to 40 per cent drop in credit card purchases.
But the mood has shifted since September, and Giordano's sales have bounced back, exceeding the levels of 2008, which was a booming period for regional retail. Sales in Saudi Arabia are strongest, while the UAE market remains the most challenging.
Mr Chugani expects Giordano to end the year with a minimum 20 per cent annual sales growth. In the UAE, he expects sales to rise by 15 per cent, compared with last year. Giordano plans to open at least 15 more stores around the region next year and to reach 250 stores across the region by 2015.
The brand also plans to launch an online retail portal for the region, starting in the Emirates, Mr Chugani said. The launch is likely to be in the first quarter of next year.
Sajid Sayed, the general manager of Giordano with responsibility for UAE operations, said with the growing popularity of social networking, demand for online retail would grow.
"People are so geared into what's on their screen, and I think online retail is going to come on board."