The price of clothing: the government negotiates a curb in March, but the industry warns that it will increase due to the change of seasons

There are barely two weeks left until the start of March, a month when not only the prices of school supplies and tuition increase, but also those of clothes and shoes due to the change of seasons.

In 2022, the item climbed 10.7% that month, and another similar percentage was added in April; and for March of this year it is expected to increase by the same magnitude, despite the fact that over the summer the item moved well below the general INDEC price index and that the Department of Commerce is seeking to extend the current price agreement until June.

“The new fall-winter clothing collection is already played out,” say industry sources. “The authorities will be able to try to stop price increases on so-called continuous products – which are sold all year round, such as jeans, for example – but on the others it is impossible because there is no of comparison parameter, because they are new clothes. On the other hand, the collection has already been manufactured for several months, with costs that have increased”, they said GlobeLiveMedia benchmarks in the sector, between 100% and 120%, so the new prices – many of which are already in storefronts as an advance – roughly reflect these increases.

The collection has already been manufactured for several months, with costs that have increased between 100% and 120%.

Indeed, if the increase in the item in January published by the INDEC was barely 2.3%, the increase over one year reached 120%. And it will remain high in March, even if the government manages to relax the new price lists somewhat, due to the drag. In the clothing sector, they point to a variation over one year of around 90%, but in the months to come.

“We discuss what we do with what we have frozen since September, which is the continuum, like jeans, basic t-shirts. There are a lot of problems and the government only wants to give us 3, 2%, but since February, while other positions were allowed to increase further this month,” an industry source said.

Informants even point out that “the textile was allowed to increase by 7% from February, but the collection has already been manufactured for several months, with costs soaring,” they said. GlobeLiveMedia benchmarks for the sector, between 100% and 120%, until June, with the trajectory of 3.2% that the Ministry of Commerce is negotiating with different sectors. The objective is to achieve a slowdown in inflation and that it is around these values ​​by the middle of the year, an objective which the market anticipates as very difficult.

According to the source, what is not continuous has not yet been discussed in the negotiations, but the authorities will also seek to maintain the same slowing trajectory.

Like the vast majority, the apparel industry has no alternative but to negotiate with the government and adhere to agreements. Mainly for two reasons: the need to have SIRAs (import permits) approved for inputs and final garments in some cases, and the continuity of the Now 12 program with preferential interest rates. Although today few clothing brands offer such a quota, they use Now 3 and Now 6, keys to drive a sale that has started to decline in recent months.

“Today, the consumer is very cautious. There are brands fighting for their place. That’s why the prices can’t go up too much either because they’re not going to sell, especially those in the medium and mainstream segment,” they explained to the industry.

According to the data they manipulate in the sector, in recent months the sale has fallen between 10% and 15%, much more in informal markets and people with less purchasing power, such as La Salada, for example.

Today, the consumer is very cautious. There are brands fighting for their place. That’s why prices can’t go too high either because they’re not going to sell

“Although in 2022 inflation in the sector was above the INDEC CPI average, I believe that this year will not happen. When there is no demand, companies must liquidate In addition, strong increases have already occurred. Fabrics increased by 6% in January and February, but will now increase by 3.2%. Parity will be signed at 60%. Going forward, the price rises should subside,” said a major benchmark in the children’s clothing industry,” he said. GlobeLiveMedia industrial. And he added: “Last year the percentage was higher because the inputs increased a lot, the labor increased by 140% and the demand was strong. This is not the reality of this year”.

According to information sent to Commerce by the Argentinean Industrial Chamber of Clothing (CIAI), 100% of the production cost is made up of 40% of the fabric; 38% clothing; 6% printing, embroidery and washing; 3% avios (all non-cloth supplies); 2% iron and finish; 3% design; 1% casting/samples; 1% cut; 1% quality control and 5% factory overhead.

In turn, the price to the public is composed, according to what has been reported to the government, by: labor costs 27.78%; taxes 25.04%; financial costs 14%; rentals 13%; raw materials 12.33%; other 3.11% and profit margin 4.74%.

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