Side portrait of beautiful young black woman with afro  shopping for clothes in store

The pandemic brought many things to fashion that few ever dreamed of — a near-complete retail shutdown, a sudden switch to produce masks and hand sanitizer and, now, the prospect of higher prices. 

Price inflation in the ever-promotional, always on sale world of fashion is something the industry hasn’t really seen in a generation or more as increasingly sophisticated supply chains made producing and shipping apparel more efficient.  

But now prices in fashion are inching up, signaling both challenges and opportunities for an industry in flux.

The official governmental reading on inflation Wednesday — which might even have underreported increases given the constraints of the pandemic — showed a sharp rise in prices across the economy last month. 

The Labor Department’s Consumer Price Index for April jumped a seasonally adjusted 0.8 percent from March, well ahead of the 0.2 percent uptick economists projected. 

The numbers — while a fractional increase can look sedate to those who don’t spend their lives poring over economic data — were shocking enough to send the Dow Jones Industrial Average down 681.50 points, or 2 percent, to 33,587.66 even though investors were braced for higher prices.

Leading the inflation charge was the price of used cars and trucks, which rose 10 percent for the biggest monthly increase on record. But prices of all sorts of goods were moving up, including food, electricity, transportation services and more. The latest fear is a big spike in gas prices as the hacking attack on the Colonial Pipeline has caused stations to run out in the Southeast.

The hope is that the price increases are a temporary effect of the U.S. economy restarting at something closer to full strength as vaccinations ease COVID-19 worries.

But big questions linger. 

“Transitory? Perhaps mostly. Manageable? Not so sure,” wrote Stephen Stanley, chief economist at Amherst Pierpont Securities, in an analysis. “The April CPI data are shocking. The last time core inflation rose by this much in a month was 1982, when inflation was running at about 9 percent. The composition shows that the bulk of this surge is directly related to the economy reopening, and I am 100 percent on board with the notion that most of the spike in prices seen in April will not persist for long.  

“However, if even one‐quarter or one‐third of the price pressures evidenced today proves more persistent, then the Fed is in deep trouble, and, regardless of what Fed officials say, there will be no way to know that ahead of time,” he said. 

The Federal Reserve, charged with keeping unemployment down and prices under control, is the watchdog on inflation and has the power to raise interest rates to tamp down runaway prices. 

Fed governor Lael Brainard preached “patience” in remarks this week. 

“To the extent that supply chain congestion and other reopening frictions are transitory, they are unlikely to generate persistently higher inflation on their own,” Brainard said. 

“Remaining patient through the transitory surge associated with reopening will help ensure that the underlying economic momentum that will be needed to reach our goals,” she said. 

Translation: the Fed is going to wait and see for now before pushing prices down with interest rates. Fed chairman Jerome Powell has said the goal is for longterm inflation to average 2 percent, but that the economy can tolerate short periods above that rate. 

That could open up some space for prices in the fashion industry to creep up.

Prices on all goods and services have risen 58 percent so far in the 21st century, but dropped 9.1 percent for fashion (including apparel, accessories and footwear)  and 20 percent for women’s apparel in particular. 

Many fashion categories are just starting to move higher now. 

  • April men’s apparel prices rose 1.3 percent from March and were up 1 percent year-over-year. 
  • Footwear prices increased 0.5 percent for the month and 3.9 percent for the year.
  • Jewelry and watch prices rose 0.4 percent for the month and 9.5 percent for the year.

Women’s apparel was the exception, slipping 1 percent for the month and 0.5 percent over the past year. But anecdotal takes from retail CEOs suggest they’re feeling more pricing power and edging prices higher at a time when they’ve cleaned out inventory, bought cautiously and are, hopefully, welcoming shoppers back to stores. Brand CEOs also admit they have steadily been edging prices higher, especially in luxury goods where pricing power is traditionally stronger. 

COVID-19-driven shipping logjams, wage increases, pent-up demand from consumers and government stimulus are all conspiring to push prices higher. It’s a fast-moving dynamic that could still shape the economy in unforeseen ways. 

The industry at large could be going through an evolution that Under Armour Inc., for one, has seen in recent years — that is, looking to focus distribution while also getting more for its goods.

“Globally, there is a lot of pressure just on logistics, on container availability, port delays, things like that,” said David Bergman, Under Armour’s chief financial officer, on a call with analysts last week. “The good thing is that the improvements that we’ve been seeing versus our expectations in our pricing ability, including the lower promotions, markdowns, off-price and then also inventory reserve assumptions relative to the health of our inventory, those improvements are actually outweighing the new tougher news relative to freight and logistical challenges.” 

For some brands, there’s the happy circumstance that they can simply raise prices because consumers have more money to spend. Others will find their costs going up whether demand rises or not. A key question is whether consumers will be willing to accept all the higher prices given that they have held the pricing power in their wallets for years. Another area to watch is how much disposable income consumers will have for fashion as they face higher prices for everything from food to home improvement materials to restaurant meals.

Some price increases are coming at blinding speed as the U.S. consumer space reopens at something much closer to full capacity. 

Stephen Lamar, president and chief executive officer of the American Apparel & Footwear Association, said some brands have found that the price of freight containers, for instance, has increased fourfold in a matter of weeks. 

 “This isn’t over a generation or something like that, this is in the last few weeks,” Lamar said. “Materials are subject to increased costs as a result of the transportation problems. You’re seeing both direct inflation as well as inflationary pressure that’s hitting the supply chain from a variety of directions.

“There’s a lot of hope that this is temporary, that this is a function of supply chains and inventory and logistics still starting to turn on,” he said. “You have these disruptions and the disruptions will show up as a temporary cost increase. Will that begin to settle down? We hope so.”

Consultant Greg Portell, lead partner in Kearney’s global consumer practice, said inflationary pressure would come in two waves. 

The first is hitting now as supply chains restart.

“The second wave will come when those trillions of dollars of government spending work their way through the market,” Portell said. “That will drive inflation, probably in an 18- to 24-month window.” 

With prices going up everywhere, fashion might be able to make its move.

“Companies have carte blanche to start pushing the upper end of their pricing envelopes,” Portell said. 

He said companies have to be careful as they raise prices — moving higher with specific goals in mind while avoiding the impulse to cut prices to grab market share. 

“Can these management teams raise prices responsibly and strategically?” Portell said. “It is an art and is something that has to be done at the convergence of strategy and tactics. And that’s not always where these management teams want to focus.”  

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