NEW YORK, New York (Reuters) — The supply of leather is down and disciples of fashion may face higher prices for their favorite coats.
The supply of leather hides has dropped because of European attempts to eradicate the highly contagious foot-and-mouth disease by destroying livestock, and the severe winter in the United States that reduced the number of American cattle slaughtered in the first quarter.
With fewer hides available for tanning, leather prices will be affected.
“There has been a fairly significant increase in the prices of raw skins over the last two to three weeks, to the tune of 20 to 25 percent,” said retail analyst John Rouleau of the investment firm Gruntal & Co. “But what I’m hearing is that nobody is buying at these levels.”
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Some up, some down
In Western Canada, hide prices have increased, but the value of all beef byproducts per head has risen only slightly because of lower revenue from rendered products, Canfax said.
Companies with large exposure to the leather market are likely to hedge their inventories against price fluctuations, analysts said.
But if the short supply persists companies will eventually have to buy at higher prices.
Some analysts do not expect consumers of more upscale goods to be easily deterred from buying.
“If you’ll buy a $400 jacket today, why wouldn’t you buy a $475 jacket tomorrow? I don’t think it’ll make any difference, particularly if it’s a designer name,” said consumer research analyst Britt Beemer of America’s Research Group.
“If we had to increase prices, the market would absorb it,” said Stan Mayer, chief financial officer of Kenneth Cole Productions Inc., a footwear and apparel designer and retailer.
Mayer said raw materials only count for 45 percent of the product price, he said.
When designers decide what becomes fashionable, “they are not ignorant or unaware of relative prices, because at some level the designers going to mass market have to make margins,” said Tom Morgan, president of Morgan Consulting Group.
For apparel producers, leather at higher prices may still be an attractive alternative to synthetic materials, which are becoming more expensive because of rising energy costs, Morgan said.
