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Apparel Stores Hit Hard by Rising Costs

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This week’s Market Mover is an entire industry, apparel stores. In the past week stock prices of many apparel stores like Gap (NYSE:GPS), Pacific Sunwear of California (NASDAQ:PSUN), Aeropostale (NYSE:ARO), and New York & Company Inc. (NYSE:NWY) have fallen by more than 5% (Chart 1). With a combination of high raw materials costs for clothing inputs like cotton and rayon still elevated and continuing weak customer demand, the apparel industry is in a vice. While prices for cotton have come down, they are still well above prices of a year ago. Americans are buying less, as their real wages (Chart 3) have begun to decline again after a brief period of growth in 2010. Reductions in real wages can directly affect retailers because consumers have less to spend and are choosier about where they spend it.

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Young Research & Publishing Inc. is a financial markets research company that covers the global investment landscape. Founded by Richard C. Young in 1978 to publish the authoritative Young’s World Money Forecast, today Young Research provides analysis for Richard C. Young’s Intelligence Report and Young Research’s Global Investment Strategy (both published by InvestorPlace Media), and is the exclusive research provider to the boutique registered investment advisory, Richard C. Young & Co., Ltd. which provides investment management services for high net worth individuals and families.