HedgeyeRetail COTD: Pricing Crack

We’re seeing the already wide gap between Hanes and Fruit of the Loom pricing widen, as prices for FOTL come off by 30% inside KSS. We still think that pricing integrity will be tough to come by.  

We’ve been very closely monitoring the pricing spread at retail for Hanes vs. Fruit of the Loom since it became more of a concern for us six months ago. We’ve gotta hand it to HBI, as they have maintained a consistent pricing premium to Fruit of the Loom in all major channels. But we’ve been floored to see a 40% price gap between the two on the same exact product at KSS vs. JCP. In other words, Kohl’s sold that same exact product as JCP, but advertized at a 40% higher price.

Now, we see the pricing dynamics change again. But not as we’d think. KSS has reduced its Fruit of the Loom Pricing to $11.99 from $17.99 for 5 pack crew t shirts, boxer briefs & a-shirts while Hanes' pricing is unchanged for the same pack size. As a result, the Hanes to Fruit of the Loom premium on crew necks has increased from 89% to 184% while the premium in boxer briefs is now 113% from 42% in April.

Fruit of the Loom has clearly been impacted by the EDLP battle between KSS and JCP, while Hanes’ pricing has remained seemingly unchanged.

Our view is that this closely mirrors the consensus view, and company guidance. HBI needs pricing integrity in 2H to hit earnings. As gaps like this widen, we think that pricing integrity dynamics can change quickly.

HedgeyeRetail COTD: Pricing Crack  - HBI FOL pricing gap