New Balance announced Tuesday that its shares will increase in price by 5.4% over the next two years, but it is not expecting inflation to reach that mark.
New Balance is the largest company in the United States by sales, and has been expanding its business into apparel and footwear, with its first line of shoes coming out in the first half of this year.
But the company said that the rise in inflation has been “a surprise.”
It said that “unlike some other sectors, we see our inflation expectations not being met.”
The company said in a statement that its forecasts for inflation “will vary over time, depending on many factors including changes in consumer spending patterns, the strength of the dollar, the composition of our business and the extent to which the economy adjusts to these changes.”
The rise in consumer inflation is not just a problem for the company’s footwear business, but for all businesses.
According to data from the U.S. Bureau of Labor Statistics, inflation in January reached a new all-time high of 7.9%.
In the first quarter of 2018, the inflation rate was 1.8%.
The new inflation rate is “particularly worrying for retailers that rely on high inflation to generate income and have to manage inventory,” said Paul Smith, an analyst with Jefferies LLC.
The rise of inflation in the apparel industry is more concerning.
According the BLS, the apparel and shoes sector saw the largest increase in inflation over the past two years.
In February, the prices of apparel were up 10% over January, and the prices for footwear were up 14% over February.
The inflation in clothing prices is particularly concerning because it represents “a substantial portion of retail sales” and is driven by “a high level of consumer spending,” Smith said.
According a report from Credit Suisse, “most consumers are likely to spend more when the cost of goods and services increases” because of the economic downturn.
“This is a major driver of the consumer spending and the overall inflation rate,” said John F. Henshaw, an economist at Credit Suise, in a research note.
The increase in apparel inflation will make the company the third-largest manufacturer of footwear and clothing in the U