Uniqlo and Zara’s pricing issues could affect other clothing retailers

When you don’t have a lot of money to spend on clothes, the solution has long been found in fast fashion.

Brands like H&M (HNNMY) Inditex (IDEXY) from Zara and Fast Retailing (FRCOF) ‘s Uniqlo has been offering clothes for years that cost very little compared to standard brands.

But between supply chain disruption and inflation, affordable options become significantly less affordable.

Uniqlo and the cost of fleece

On June 7, Uniqlo owner Fast Retailing announced that it would raise prices up to US$7.54 for its fleece and down jackets from Uniqlo’s fall/winter collection.

As Reuters reported, rising production costs for the two materials forced the Tokyo-based company to offset expenses with higher prices.

While this rise is currently only affecting Uniqlo’s Japanese stores, fashion brands raising their prices are part of a larger trend.

“Our baseline tries not to raise prices as much as possible,” Takeshi Okazaki, Uniqlo’s chief financial officer, said in a statement in January. “It will be extremely limited.”

It wasn’t long before further Uniqlo price increases were announced.

Primark, H&M and Zara all do

Primark, the Ireland-based retail subsidiary of Associated British Foods ASBFF, has announced it will raise prices for the autumn/winter season.

“With inflationary pressure mounting and the dollar strengthening, we will be implementing selective price increases on some of our fall/winter stocks,” ABF said on the April 26 earnings call.

Next NEXTa competing British fast-fashion brand, had previously raised prices by an average of 6.5% for fashion and 13% for home goods.

UBS Research has found that Zara has been raising starting prices on select items by up to 10% every month since January, with its starting prices rising an average of 18.5% in April alone.

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After announcing anticipated price increases of more than 10% for some items in March, H&M saw its shares fall as much as 13%.

Cheaper things aren’t so cheap anymore

Both brands found a clientele by offering clothes that, although not designed to last long, sold at very low prices.

A pair of Primark jeans may cost $20 while a sweater currently sells for $12.

In many ways, those who rely on these types of stores for clothing don’t have much choice.

Even after the price increase, these channels are still significantly more affordable than the next tier in affordability.

No discount, jeans at Levi’s (LEVI) – Get Levi Strauss & Co Class A Report go for an average of $70 while a shirt at The Gap (DIFFERENCE) starts at $50.

Data from the Department of Labor shows that the costs of clothing and footwear increased by 6.8% compared to 2021.

In general, these types of hikes are more detrimental to those who already earn less than average and need the cheapest option to get by.

Grocery costs at dollar stores increased 14.3% from 2021 and 22.5% from 2020, while traffic at Family Dollar and Dollar General DG increased by 20%, respectively. 4% and 28.2% since 2019.

Dollar Tree DLTR in January hiked most of its prices by 25%, from $1 to $1.25, across all of its stores.

As food and clothing are both necessary to sustain life, the trend so far has been for people to continue to shop and cut costs in other areas.

“Clothing store sales were up 11.2% year-over-year, well above the prevailing inflation rate for the category,” Neil Saunders, chief executive of GlobalData, said at the time. Just Style magazine.

“Much of this appears to be driven by consumers preparing their wardrobes for spring and summer, including anticipation for travel and vacations.”