By: Durba Ghosh

Premium clothing brands such as Van Huesen,Arrow, Izod, US Polo, Reebok and Kimaya Fashions are set to hike prices by upto 10% to offset higher input costs, while others such as Wills Lifestyle,Marks & Spencer, Reebok and Benetton plan to absorb higher costs to keeptheir sales growth intact.

The Cornelian dilemma, where retailers are tornbetween increasing prices that may impact sales in a recovering market andabsorbing 25-30% jump in prices of yarn and cotton to take a hit in their margins,has vertically split the industry.

Many garment retailers now see room to push upprices in the premium segment on the back of rising demand after spending mostof last year wooing buyers with lower prices and cutting costs by consolidatingsourcing and shutting down non-performing stores as sales slumped due toeconomic slowdown.

Interestingly, Madura Garments, the Aditya BirlaGroup firm that promotes Van Huesen in the country, is expected to absorb therise in raw material costs in the case of brands such as Allen Solly and PeterEngland.

Thats because companies are targeting thehigh-end segment in their portfolio to jack up prices. Arvind Brands, forexample, will increase the prices of premium brands including Arrow, Gant, Izodand US Polo in the country, while keeping the prices of brands such as Lee,Flying Machine and Excalibur are untouched.

Increasing prices in the premium segment wouldhave less or no impact on the target consumers, says J Suresh, CEO of ArvindBrands. Sportswear brand Reebok has yet to take a call but may increase pricesmarginally as its input costs have increased about 25%, according to its MDPrem Subhinder Singh.

Kimaya, an India-bred designer apparel brand, isalso looking at increasing prices by about 5% due to increasing input costscoupled with increase in service tax on rental property by 10%. The increasein input costs will definitely affect our expansion. It is uncalled for and wewerent expecting it, says Pradeep Hirani, promoter of Kimaya Fashions.

The company spends close to 15% of its salesproceeds on rentals, which is expected to go up to about 25% next quarter.

Cotton prices have increased almost 30% in justthree months, while yarn prices have gone up by 20%. The increase in prices ofcotton and yarn in India is a reaction to the global prices...and it hasdirectly affected textile prices, says D K Nair, secretary general ofConfederation of Indian Textiles and Industries (CITI).

These, coupled with a Rs 2 increase in petroland diesel prices, has led to a substantial increase in raw material and inputcosts for retailers.

According to E&Y retail analyst,Pinakiranjan Mishra, the increase in input costs may imply a 7-8% moreexpenditure for the apparel retailers. But coming just when garment salesstarted to rise after reporting a 25% drop last year, retailers are extremelywary of increasing rates that may hit demand.

Brands such as Marks & Spencer and Benettonare betting on higher volumes and more localization to offset the rise in inputcosts. M&S had brought down prices by 30% last year.

ITC Lifestyle too has no plans to hike rates.The demand is robust now and we see no reason to increase prices immediately,says Atul Chand, ITC Lifestyle retailing CEO. There can be a marginal increaselater in the year, he added.

Originallypublished in The Economic Times, Ahmedabad dated: March 11, 2010