US apparel sector to see 5% profits

US apparel and footwear industry operating profits are expected to be three to five per cent this year. Conditions are expected to remain challenging in the first six months and will begin to improve in the second half. Growth is expected to accelerate in the latter half of 2018, assuming the dollar remains near current levels and inventory levels are kept in check.

Most US clothing and footwear companies are still feeling the pressure from a strong dollar and choppy retail traffic, which has escalated promotional battles, while the cost of goods sold has been higher owing to the continued strength of the dollar.

They also continue to face higher costs for labor and inputs like cotton. Since most companies have raised prices to help partially offset higher dollar-related costs, the ability to implement additional near-term increases will remain a challenge, particularly for moderately- or value-priced apparel and footwear.

Companies are expected to continue pursuing merger and acquisition opportunities as they look for new sources of growth. In fact, Hanes brands was very active in this respect last year, for example, as was G-III Apparel, which expanded its portfolio of brands by acquiring Donna Karan.