Dear Valued Customer:

GFSI respects the partnerships it has built over the years with its customer’s and believes strongly the need to communicate important market information that could have meaningful impact on our businesses.

While the Resort Channel is only one component of a much larger apparel sector, it is subject to the same global influences that drive and impact the overall apparel supply chain. Over the years we have all seen and experienced the impact that inflation, interest rates, tight credit, weather, volatile consumer demand, fashion trends etc. can have on the cost and profits associated with raw materials and finished goods.  We are presently in one of those periods where the continuing rise of global cotton yarn prices coupled with a global ‘short supply ‘ of cotton yarn is putting alarming stress on core cotton based programs (i.e. tees and fleece).

Some Background:
During the recent economic downturn, which subsequently drove poor performance at retail and heightened an overall focus on reducing inventories – cotton crops around the world we’re reduced significantly (i.e. cotton growers planted less) due to declining demand. Along with this planned reduction in cotton supply, China, which is both a leding grower and consumer of cotton, had a terrible cotton yield due to bad weather further complicating global cotton availability.

In parallel to this reduced cotton supply is the fact that the economy has started to spring back and the apparel sector is trending in synch with the upswing. Retailers are aggressively filling their pipelines to bring inventory levels back in line to meet the demand and capture sales, which has quickly outpaced the cotton supply.

Two other primary growers/producers of cotton are also feeling the pressure of this growing demand on the reduced cotton supply – U.S. and India. In the Western Hemisphere (U.S.) the leading yarn spinners are short shipping their customers against their cotton contracts forcing the downstream supply chain (knitters, vertical garment manufacturers) to chase this yarn shortfall on the ‘spot’ markets and forcing them to pay a higher price than their original contract price. We have no way of knowing if the short shipments from the spinners are truly based on low supply or driven by opportunistic means to drive yarn prices higher. However, we do know that India, the world’s second largest cotton exporter behind the U.S., has banned all cotton exports in an effort to protect their cotton supply for their own production usage and stabilize surging prices which have risen more than 25% since October. The cotton export ban in India, which is a primary supplier of cotton to China, will most likely force China to turn to the U.S. to service a larger percentage of its cotton needs. The increase in demand against the short cotton supply has driven up U.S. yarn prices in the area of 30% over its historical benchmark of the last several years.

This communication is not a request to raise any current pricing but to alert our customers and sales partners of critical global market influences that are impacting our business. We’re encouraging all of us to consider managing product and inventory flow in ways that allow us to hedge and minimize these cotton cost increases. Greater visibility to future inventory/product needs within specific lead time guidelines permits us to manufacture customer programs at our lowest cost producers and subsequently minimizing/offsetting cost increases and protecting customer profits.

I apologize for the lengthy communication but felt it was very important to explain these current challenges in the cotton markets so we can all plan our future business accordingly and minimize the potential negative impact.

Thanks again to all of our customers for their continued support,

Chris Young
Vice President – Sales / Brand – Leisure
GEAR For Sports / Champion Custom Products / Under Armour
P: 913-693-3209
cyoung@gearforsports.com

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