As the cost of commodities, foreign labor, and freight rise, so could the price of sporting goods. The vast majority of sporting goods manufacturers — over 90 percent — had higher input costs in the fiscal first quarter, in large part due to the increasing cost of cotton and fuel, as well as wage requirements for foreign employees.
Manufacturers paid 3.3% more for imported sporting goods in 2008 than in 2007. That same year, retail price tags increased 3% in response. That pattern is likely to be repeated in 2011 following a 2.1% increase in the cost of imported goods in April.
But Dean Maki, chief U.S. economist at Barclays (NYSE:BCS) Capital in New York, says not to worry. “The Fed is still aiming for higher core inflation so it will not be worried if retailers are able to pass along some of these price increases,” Maki said. As of April, projected inflation was 1.5%, up from 1.2% in January.
Twenty-five percent of sporting-goods retailers raised prices on apparel in the first quarter, while companies like Nike (NYSE:NKE) and Under Armour (NYSE:UA) are planning price adjustments for 2012. “These are the kinds of companies big-box stores want to lean on for price increases because they have good products,” said Michael Binetti, an analyst for UBS Securities in New York. Retailers like Dick’s Sporting Goods (NYSE:DKS) and Foot Locker (NYSE:FL) want to be able to pass the burden of higher input costs onto consumers rather than absorbing them themselves, but there is question as to whether consumers are in a position to pay higher prices at present.
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