Companies are “raising prices, but are trying not to broadcast it for competitive reasons, and it also doesn’t look good for public relations reasons,” said John D. Morris, an analyst with BMO Capital Markets...Several stores have couched recent increases inside promotions, or nudged price tags up by a little under 10 percent, the point at which many shoppers’ radar picks up on the move. For example, at American Eagle Outfitters, the price of striped polo shirts was raised about a week ago to $34.50, up from $29.50. At Brooks Brothers, a wrinkle-free shirt is $88, up from $79.50 in January.Got that? As I have been warning since late last year, prices in the second half are going to skyrocket. Bernanke has printed too much money for it not to have a significant impact. Climbing gold prices, oil prices and cotton prices are not an accident. They most significant cause is Federal Reserve money printing.
The increases have not been imposed from rack to rack. Retailers and analysts say stores are testing to see where customers will accept higher prices. Will shoppers accept more expensive jeans, but revolt if the price of T-shirts rises? Will they stop buying socks if the price goes up by 50 cents? What about $3?
Gauging customers’ reactions could help retailers avoid errors in pricing when they make widespread changes in the autumn. At American Eagle, “there are areas within the categories that we do believe that we can take prices up,” said Roger S. Markfield, vice chairman and executive creative director, in the company’s March conference call. “In the right items, the customer responds as though there was no price increase.”
“In the areas where we have tested and it is not possible, we will not do that,” he said.
Aéropostale, too, has begun increasing prices selectively, executives said on its fourth-quarter conference call.
“Like us, some of our peers are testing different things and testing higher prices, and primarily in preparation for the back half of the year,” Thomas P. Johnson, the chief executive of Aéropostale, said. “However, there is still uncertainty surrounding the macroeconomic environment and the consumers’ response to higher prices.” Right now, a long-sleeved Ralph Lauren men’s shirt costs $95, up from $89, an increase of about 7 percent, while a women’s gingham oxford at J. Crew costs $72, up from $69.50 a year ago, an increase of nearly 4 percent.
Janney Capital Markets follows prices and promotions at a group of specialty retailers. In mid-April of last year, it noted that Charlotte Russe was selling swimwear at $14.50 and up. Now, swimsuits sell for $16.50 and up.
Flip-flops at The Children’s Place had been two for $5, and now are two for $6.
Bullhead-brand jeans for girls at Pacific Sunwear were two for $55 last year, Janney said. Now, they are two for $59.
And cotton underwear at Soma Intimates, once five for $25, now sell for five for $25.50.
Like Soma, other retailers are hiding higher prices in complicated promotions. The teenage retailer Zumiez, for instance, went from an offer of three T-shirts and two pairs of jeans for $85, to two T-shirts and two pairs of jeans for $80. (Hopefully its customers have already taken algebra.)
While virtually all retailers have said that prices will climb in 2011, across-the-board price increases have not yet been reflected in the Consumer Price Index. In March, apparel and jewelry prices were 0.5 percent below where they had been in February, the Bureau of Labor Statistics said.
Though retailers were expecting more outrage, shoppers so far do not seem put off by the increases.
“A number of them seemed encouraged that customers weren’t backing away as of yet,” said John Long, a retail strategist at the consulting firm Kurt Salmon. “They hadn’t encountered much in the way of resistance, which they found surprising.”
At The Children’s Place, which recently changed the standard ending on its items from X.50 to X.95, customers “didn’t really even notice in these early rounds,” Mr. Morris of BMO Capital Markets said.
Although shoppers are taking the hit on the higher prices for now, Mr. Morris said the tactic could be smart for the retailers.
“In a way, that’s not a bad strategy because their customer is less likely to have sticker shock when they really have to ratchet up come the third quarter,” he said.
Of course. there is an alternate view, held by NYT's Paul Krugman:
....there’s nothing...to suggest any reason to consider inflation a problem.