Investors punished stocks across the clothing sector Wednesday after Jones Apparel Group Inc. said delays and higher costs, particularly of cotton, had hurt its profit and caught it well short of analyst estimates.
Jones' stock fell 22 percent, the largest drop, and rival Liz Claiborne Inc.'s stock fell almost 6 percent.
Many other clothing sellers lost market value Wednesday as the market stumbled overall.
Shares of VF Corp., which makes Vans skate shoes and North Face outdoor wear among many products, fell 3 percent. Charming Shoppes shares fell 4.7 percent. Clothing merchants whose sales are tied to fewer brands also fell: AnnTaylor shares slipped 2.6 percent; Abercrombie & Fitch Co. and Pacific Sun more than 4 percent; Gap Inc. almost 2 percent and The Children's Place 2.5 percent.
But major department stores and mass marketers that sell clothing under lots of brands emerged relatively comfortable Wednesday. Shares of Target Corp. fell 0.8 percent, Limited Brands 0.7 percent and Saks Inc. 0.9 percent. Macy's shares rose 0.4 percent, Nordstrom 0.3 percent and TJX Inc. 0.4 percent.
Jones and others had been warning about soaring prices of raw materials and tighter capacity in mills. And analysts surprised by Jones' big third-quarter miss are now concerned about what other retailer may report in coming weeks.
On top of rising costs, which are expected to push up consumer prices, some stores may suffer if their holiday wares arrive late. And they may find themselves cutting prices on what they do have in stock if they have ordered more than shoppers can afford as the economic recovery stalls.
"The costs are snowballing," Stifel Nicolaus analyst Richard Jaffe said in an interview Wednesday. "It's bad enough to have it on order, but if comes late, that's another issue."
Jones' results "really exposed the problem," said Nate Herman, vice president of international trade for American Apparel and Footwear Association. "This is something that we have been seeing coming down over the past year."
"Raw materials costs, freight costs and tight factory capacity were evident this quarter and challenged gross margins," Jones Apparel CEO Wesley R. Card said in a statement as the company released its earnings report.
Costs are rising for several reasons. Suppliers are fighting for space on fewer ships to import their goods after freight companies took ships off line during the recession. Suppliers and many retailers shipped goods early to avoid holiday gridlock, but holding inventory two or three months early increases their costs, Herman said.
And many clothing and footwear factories in China that shut down at the height of the recession and began retooling to produce more profitable goods are now operating at 20 to 30 percent of capacity.
Most important of all for Jones, cotton prices have more than doubled from a year ago, according to Terry Townsend, executive director of the International Cotton Advisory Committee. Townsend estimated that cotton is now priced at $1.41 per pound, compared with 67 cents a year ago, reaching the highest level in 150 years.
Weather damage in China also helped send prices up, while an export ban in India, the second-largest exporter of cotton, has been another factor. And general worry about cotton availability has led to panic buying by mills.
Higher prices generally should not appear until after the holiday season, however.
That's because companies had already ordered fabric before cotton prices began soaring. But consumers should expect to see higher prices on items from jeans to underwear in spring.
"It will be single-digit increases," said Herman. "It can't be double digits," in this economy.