Retailers Justify Price Hike With Cheap Stitching, Buttons

Aug. 19, 2011— -- Parents and kids shopping for that new outfit for the first day of school may be surprised by the sudden price hike at some popular stores.

Retailers are raising prices on clothing during this back-to-school season by an average of 10 percent to offset the rising costs of labor and materials.

Many retailers are worried that more of their customers are cash-strapped and will balk at the higher prices, so they are using creative ways to pump up their profits.

"Let the consumer trickery begin," said Brian Sozzi, a retail analyst for Wall Street Strategies.

Some stores are adding cheap stitching or buttons to justify the hike, while others are using less-expensive fabric and calling it a new look. Those embellishments can add pennies to $1 to the cost of a garment, but retailers can charge $10 more for them, according to Marshal Cohen, chief industry analyst with market research firm the NDP Group.

"Stores are making consumers believe they're getting more for their money," said Cohen.Abercrombie & Fitch, one of the most popular brands among teens, is one of the retailers raising prices. This year the brand is advertising a "Redesigned 2012" jean collection that includes "softer" jeans with "the perfect amount of stretch." They are priced between $78 and $88, which analysts said is $10 more than they were last year.

Eric Cerny, a spokesman for Abercrombie & Fitch, declined to comment but reiterated what executives recently told investors -- increases will happen in September and the chain will not sacrifice quality to achieve cost reductions.

Sozzi examined the jeans and said be believes they are thinner and "of cheaper quality." The extra stretch, he says, could mean the company is saving costs by using less denim.

Production and labor costs are expected to rise 10 percent to 20 percent in the second half of the year, even though they have remained low for almost two decades. Costs can quickly add up -- raw materials account for 25 to 50 percent of the cost of garments, while labor accounts for 20 to 40 percent, according to analysts.

After the price for girls' corduroy pants almost doubled, Lands' End, based in Dodgeville, Wis., raised the price of the pants from $7 to $34.50. The company also added buttons and extra stitching to dress them up.

"Lands' End is passionate about quality and we won't compromise on developing innovative products for our customers. We continually improve our products by offering new styles, fabrics and construction details -- enhancing the quality of our merchandise rather than sacrificing it for a lower cost product," said Michele Casper, a spokeswoman for Lands' End.

"Consumers are going to notice the price differences," Casper continued. "But they are also going to get a lot of added benefits so they know they're not getting shortchanged."

Rhonda Sayen of Stephens City, Va., said she noticed that jeans that were about $40 are now closer to $60. She also said she can spot lower quality T-shirts at some of the stores.

"I know prices have changed," she said. She and her husband decided to stick with a $400 budget for clothes and supplies for their four children, ages 3 to 18. "You ain't fooling me."