Debenhams allays fears over cotton 'price spike'
Department store Debenhams downplayed retail sector concerns that the spike in cotton prices will translate into inflation in clothing prices and a dip in sales.
Flooding in Pakistan and China has sent global cotton prices soaring to a 15-year high as retailers already face higher transport costs, wage inflation in China and rising VAT in the UK.
But Debenhams' chief executive Rob Templeman said the store does not expect to see a knock-on effect from cotton prices on its clothing sales, despite forecasts from Verdict Research that clothing inflation could hit as much as 4.4% in Britain this year.
Debenhams expects prices to start to come down again, thanks to a strong harvest in India - the world's second biggest producer, - and also stressed that it has hedging in place to ameliorate sudden price spikes.
Mr Templeman's optimistic stance contradicts concerns elsewhere in the retail sector.
Last month, the clothing chain Next warned that prices could rise by as much a 8% next year. And on Monday, Associated British Foods, which owns budget clothing retailer Primark, warned its profits faced a squeeze from ballooning cotton costs.
But Mr Templeman said Debenhams is less exposed than Primark. "The increase in cotton translates at the lower end of the market to a bigger price increase to the consumer," he said.
Fairtrade campaigners also yesterday poured cold water on claims that soaring cotton prices spell the end of cheap clothes. Toby Quantrill, the head of policy at the Fairtrade Foundation, said: "Adjusting for inflation, the real story of cotton is that its price is just one third of its value in 1970, which has compounded rural poverty in southern hemisphere cotton-growing countries."
Debenhams' comments on cotton prices came alongside interim results showing flat like-for-like sales compared with the previous 12 months - a short- term hit for the group's strategy to convert in-store concessions back to Debenhams' "own-bought" stock, the company said.