Updates and Analysis
Hema cancels all orders
January 14, 2021
Hema told its suppliers in Asia on January 11 that it has canceled all orders effective immediately, according to a news report published today. Consequently, the WRC has added Hema to the negative side of the tracker.
Hema is an Amsterdam-based retailer with stores in 10 countries that sources goods from over 600 suppliers across 40 countries.
For goods already delivered to Hema, for which Hema had not yet paid suppliers, the company told suppliers it would pay them 30 days later than originally scheduled. Hema said it currently does not expect to place any new orders.
This the first example that the WRC has identified of a major apparel retailer systematically reneging on its financial commitments on existing orders during the current round of lockdowns, although last month we received reports from Bangladesh of some order deferrals and reduction of order amounts from original commitment levels.
Suppliers are still waiting for Colloseum (part of Schulz Fashion) to pay for orders completed prior to pandemic
November 24, 2020
In late October, several suppliers reported to the WRC that German apparel brand Colloseum had failed to pay for completed orders on originally scheduled payment terms.
The suppliers stated that they faced long delays in payment for goods finished in March that were initially supposed to be paid within 60 days of completion. Instead, Colloseum has continued to fail to pay for these orders through the present day. At this point, the delays present a serious threat to continued factory operations and, therefore, to workers’ incomes.
Recently, Colloseum has told suppliers it wants to accept only 50 percent of these garments, which would cause enormous losses for the suppliers. So far, suppliers have refused to accept the proposed settlement, instead insisting, appropriately, that they be paid in full for the work they have done.
Although Colloseum’s parent company Fashion FC Club filed for insolvency in May of this year, the brand was acquired by Schulz Fashion on July 1. The acquisition of the brand rescued Colloseum from closure and allowed the chain to keep open the majority of its retail locations. While the WRC recognizes that the pandemic presents a significant challenge for apparel retailers, including Colloseum, this does not excuse retroactively canceling half of their orders nor many-month delays in payment terms. Like all brands, Colloseum has an obligation to pay for its in-production and completed goods at the originally agreed upon prices and on the originally agreed upon timelines.
The WRC sought to clarify Colloseum’s Covid-19 sourcing practices in a letter sent on October 26, 2020; however, to date, we have received no response to our inquiry.
American Eagle Outfitters imposed significant retroactive discounts on some suppliers
November 23, 2020
In April, sourcing agent Li & Fung communicated to some American Eagle Outfitters (AEO) suppliers, on behalf of the brand, that AEO (American Eagle, Aerie) was imposing a 20 percent price reduction on certain categories of apparel. These were goods suppliers had already produced or were in the process of producing.
AEO acknowledged that it took these discounts but told the WRC that it softened the blow by paying the affected invoices immediately upon receipt, rather than waiting until 60 days post-shipment as per its usual policy. Accelerated payment might have been valuable enough to suppliers to make up for a smaller discount; however, given the large size of the discounts AEO imposed, it is virtually certain that affected suppliers were left considerably worse off than if AEO has paid its bills in the agreed amount on the agreed schedule.
Other brands that imposed discounts early on during the pandemic later agreed to pay back the discounts to suppliers. AEO should do the same.
C&A agrees to pay for remaining orders
October 30, 2020
At the end of May, we reported that European clothing retailer C&A had reinstated a large volume of its retroactively canceled orders, which we estimated to be valued at over $1.5 billion. We noted that, while this represented a very sizable advance in the company’s position, C&A was still not paying for a modest, but significant, amount of production. The exact amount of outstanding cancellations could not be determined precisely because of conflicts between reports from suppliers and from C&A.
This week, C&A reached a decision to pay in full for all remaining orders that were in-production or completed at the outset of the crisis. This is an important development, and, on the basis of this new commitment, we have placed C&A among those corporations that are now paying for orders in full. This decision by C&A will result in tens of millions of dollars in payments flowing to suppliers.
It is concerning to see that C&A’s public statement does not communicate honestly about the fact that they originally canceled orders outright (see their March notice to suppliers), with major impacts on suppliers and workers, and instead now says the orders were merely “put on hold”.
The delay in achieving 100% payment—we are now seven months from the date of C&A’s original cancellation—has no doubt been costly to many suppliers. Given the ample resources available to its ownership, C&A’s original cancellations were never defensible nor is the slow pace at which C&A has rectified the problem.
Late, however, is better than never, and C&A’s decision to set things right, even at this late juncture, will benefit many suppliers and workers.
Camaïeu is refusing to pay for completed orders
October 1, 2020
Reports from suppliers recently received by the WRC indicate that the French brand, Camaïeu, failed to pay for completed orders and proceeded with significant retroactive cancellations of in-production orders during the Covid-19 pandemic. According to these suppliers, Camaïeu is refusing to reinstate orders of both finished and in-production goods. Several months have passed since temporary store closures have ended, and Camaïeu has had ample opportunity to rectify this dereliction of responsibility.
It should be noted that Camaïeu was acquired by Financière immobilière bordelaise (FIB), an investment fund which specializes in real estate, in August 2020. In purchasing Camaïeu, FIB took on the brand’s financial obligations, including their obligation to pay for orders, which should be of primary concern to the brand’s new owners.
The WRC contacted Camaïeu to request clarification on its sourcing policies during the pandemic. We did not receive a response.
Bestseller suppliers report discounts imposed of up to 10%
September 30, 2020
In May, we reported on Bestseller’s partial order cancellations and retroactive price cuts across its supply chain. Bestseller suppliers have reported to the WRC that the company imposed discounts of up to 10% on some orders that were in production at the outset of the pandemic. This represents all of suppliers’ profit and a portion of their out-of-pocket production costs.
Bestseller has now announced that it was able to avoid a deficit during the pandemic, attributing this accomplishment, in part, to the role played by its suppliers. This can only be a reference to the financial burden Bestseller chose to impose on suppliers by declining to pay them the amounts it originally agreed to pay for the goods it asked suppliers to make.
Bestseller reports that it is paying suppliers on an accelerated basis—10 days after cargo closing—for the three-month period of July, August, and September and claims that the benefits to suppliers of these accelerated payments outweigh the costs of the discounts Bestseller previously imposed. If the advance payments really do serve to make suppliers financially whole, this would merit a re-evaluation of Bestseller’s overall performance with respect to order payments. However, when the WRC invited Bestseller to substantiate this claim with evidence, the company failed to respond. It is notable, in this regard, that the accelerated payments Bestseller reports from July through September will be short-lived. Bestseller will soon impose new payment terms on suppliers that are considerably worse (90 days versus 40 days from the date goods are shipped) than those Bestseller maintained prior to the pandemic.
In its recent announcement, Bestseller also reported that it is returning the government aid it received. If Bestseller has the resources to pay back its 81,000,000 krone (US$12.86 million) support package, then it can afford to fulfil its original contractual obligations to the suppliers and workers who are responsible for Bestseller’s surplus. Indeed, Anders Holch Povlsen, the CEO and sole owner of Bestseller, has a net worth of US$10.9 billion, and his family is the third richest in Denmark. He could pay suppliers himself, should he choose.
Primark confirms full reinstatement of all in-production orders
September 10, 2020
Primark has made significant improvements since our previous update. Today we moved Primark to the positive side of the tracker after receiving further clarification from the company on several areas described in its latest public statement.
Primark states it is continuing with the same 30-day payment terms it had in place prior to the pandemic. There was a brief period when Primark was considering extending payment terms, but the company has since reversed that and recommitted to paying suppliers 30 days after the product leaves the port.
URBN Invokes Force Majeure to Evade Responsibility to Suppliers
September 3, 2020
Despite numerous brands and retailers agreeing to pay for orders completed and in production at the start of the Covid-19 pandemic, Urban Outfitters and its subsidiary brand Anthropologie have been unwilling to make this commitment and have invoked force majeure to avoid paying for orders. The URBN group has refused requests to clarify their position on order payments and to commit to pay for finished and in production orders at the originally agreed upon prices and on the originally agreed upon terms, even though the company borrowed $220 million to preserve cash reserves at the beginning of the pandemic.
According to Drapers, “Urban Outfitters…cancelled orders and told suppliers it can no longer accept delivery of goods on purchase orders. The retailer told creditors that any products sitting with freight forwarders will be discounted by 30%.” More so, supplier factories have reported that URBN is “finding loopholes not to pay” and claiming that “the color was wrong, now [suppliers] have to change the color. Six weeks ago [URBN] wanted a particular red, now [URBN] want[s] it to be a different color red. So they’re trying to get out of paying.” There has been no indication from URBN or its suppliers that this has improved.
As a result, supplier factories, and ultimately workers, will have to bear the brunt of Urban Outfitters' refusal to honor its obligations, carrying the costs of garment inputs necessary for production and missing out on pay for labor that was already completed. This leaves supplier factories vulnerable to shutdowns and workers at risk of destitution.
In its FY19 10-K form, URBN claimed that “during fiscal 2020, we purchased merchandise from approximately 5,000 vendors located throughout the world. No single vendor or manufacturer accounted for more than 10% of merchandise purchased during that time. We do not believe that the loss of any one vendor would have a material adverse effect on our business.” Although URBN would not suffer if their supplier factories were forced to close, workers surely would.
TJX added to tracker
July 23, 2020
Last week the WRC added TJX (the parent company of T.J. Maxx and Marshalls) to our tracker after receiving a new report from a factory owner of TJX’s refusal to pay for finished apparel orders in India.
After earlier reports of TJX’s cancellation of orders in Bangladesh, the WRC had written to TJX in mid-April, asking whether TJX plans to pay in full for orders completed and in production with the originally agreed upon prices and terms. This query went unanswered by TJX.
TJX Chief Executive Ernie Herrman claims that, due to Covid-19, “strategically, nothing will change” for the company and that sales in May were higher than they were a year ago—thanks to T.J. Maxx’s push to reopen stores in the midst of the pandemic (85 percent of T.J. Maxx locations had reopened by mid-June). Indeed, many financial advisors tout TJX as a stock to buy during the pandemic.
Despite its financial health, the company retroactively canceled, and refused to pay for, orders placed with suppliers before the crisis—thereby endangering suppliers and threatening the livelihood of workers.
Notably, the company rewarded shareholders with $480 million in dividends and stock buybacks in the weeks immediately preceding the crisis, on top of $2.6 billion it paid to shareholders last year.
Gap Inc. now paying in full
July 10, 2020
Gap Inc. (owner of the Old Navy, Athleta, Banana Republic, and Gap brands) has been listed on this tracker among those corporations that have not made a commitment to pay in full for goods that were in production when the crisis began. This was due to Gap Inc.’s cancellation of some orders; its imposition of sizable discounts on some orders, related to storage charges; and its extension of payment terms for some orders, without the provision of adequate low-cost financing to affected suppliers. This week, Gap Inc. revised its approach and agreed to pay in full for all orders previously subject to cancellation or discounts.
With the commitment to pay in full for canceled orders of finished goods and goods in production, and to pay in full for orders previously subject to pack and hold storage charges, Gap Inc. is now not canceling any orders, nor applying any discounts. Gap Inc. is still extending payment terms for a portion of its supply base. However, we note that the corporation has a supplier finance program, which provides low-cost financing to suppliers, and it is the WRC’s assessment that that program now commands sufficient lending capital to address supplier needs that may arise as a result of the delayed payments.
Accordingly, we now list Gap Inc. among those corporations committed to pay in full. Given that the corporation has faced challenges during the crisis more severe than those confronting some of its competitors, and given the large volume of orders at stake, it is to Gap Inc.’s credit that it has made it a priority to honor its obligations to suppliers and workers related to past orders.
Levi’s extends financing to all its suppliers
July 6, 2020
Levi Strauss & Co. was previously listed on this tracker among those brands that have not made sufficient commitments to pay for orders, on time and in full. The reason was the brand’s decision to delay payments to all suppliers relative to agreed terms. This placed suppliers’ cash flow, and their ability to pay wages, at risk. While Levi’s has provided low-cost financing to a portion of its supplier base through a program involving the International Finance Corporation (IFC), many suppliers were ineligible for this program and, therefore, did not have access to the guaranteed low-cost financing necessary to protect cash flow in the face of payment delays.
On July 2, the WRC was informed by Levi’s that, as of this week, all of its suppliers now have access to low-cost financing, guaranteed by Levi’s, to help them weather Levi’s payment delays. Levi’s is providing this access via an expansion of its IFC loan program and the creation of a new loan facility designed to accommodate suppliers ineligible for the IFC program. As a result, Levi’s is now protecting the cash-flow of all suppliers, despite its extension of payment terms.
Kohl’s reneged on bills to suppliers, then paid a huge dividend to shareholders
June 17, 2020
Kohl’s, one of the United States’ largest department store chains, retroactively canceled more than a billion dollars in orders at the outset of the pandemic. Kohl’s notified suppliers in mid-March, via conference call, that it did not intend to pay for these goods, much of which suppliers had already manufactured. With apparent indifference to the ethical implications, Kohl’s then paid a $109 million dividend to its shareholders on April 1.
The company chose to prioritize a discretionary gift to shareholders—who it had already rewarded over the last three years with $2.4 billion worth of dividends and stock buybacks—over its obligation to pay for the goods it asked suppliers and workers to make. In so doing, Kohl’s put workers at grave risk of unemployment amid a global pandemic. The Bangladesh Garment Manufacturers and Exporters Association reports that thousands of workers will lose their jobs, in Bangladesh alone, because Kohl’s refuses to honor its obligations. Many of these workers have been making clothes for Kohl’s for years.
It is notable that the actions of Kohl’s—which a reasonable observer might consider to be little more than outright robbery—are probably legal. Kohl’s employs a cancellation clause in all of its purchase orders so grossly one-sided that it effectively gives Kohl’s the contractual right to cancel orders without liability at any time and for any reason. The fact that suppliers agree to such terms is a testament to the power imbalances that define supply chain relationships in the apparel industry.
C&A has reinstated a large volume of orders, but some remain canceled or postponed to 2021
The billionaire family that owns the company has the resources to honor all of C&A’s obligations but has chosen not to do so.
May 27, 2020
C&A, a European clothing retailer with a massive global production footprint, canceled orders across the board, on all goods already completed and in production, at the inception of the crisis—including more than $125 million in Bangladesh alone (conservatively estimated). Extrapolating from data available from Bangladesh suggests that the total volume of C&A’s cancellations, globally, exceeded $1.5 billion, affecting hundreds of suppliers and hundreds of thousands of workers.
The company has shifted its position considerably over the ensuing weeks, reinstating a substantial portion of the orders originally canceled. The exact percentage is unclear, because the company’s statements to the WRC and other researchers, asserting that it is now paying for well over 90% of the original orders, are partially contradicted by reports from some suppliers, which indicate that reinstated orders, while sizable, represent a smaller percentage of the total.
One complicating factor is that C&A has been less than fully candid about a significant element of its approach: the fact that it is delaying delivery, and payment, for as long as a year on some of the orders it has nominally reinstated. This means that affected suppliers cannot ship the clothes they have already made and cannot request payment until well into 2021. Suppliers have already incurred the cost to produce these goods. Having to wait a year before they can request payment, and having to warehouse the goods in the meantime, is, for many suppliers, no better than an outright cancellation. These postponements appear to affect a modest, but consequential, percentage of C&A’s outstanding orders. Despite the lack of full candor on this issue, it is notable that C&A has not engaged in the aggressively misleading public relations gambits we have seen from some other corporations.
Overall, it is clear that C&A has reinstated hundreds of millions of dollars in orders, for which the company deserves credit. It is also clear, however, that a significant percentage of C&A’s orders remain canceled—or postponed for so long that they might as well be canceled—which is why the company remains on the negative side of our Tracker. Whether the reinstated orders represent most of those outstanding at the outset of the crisis, as the company asserts, requires further inquiry to reconcile the company’s statements with recent reports from some suppliers.
Another important and unanswered question is how C&A’s owners can justify any cancellations or postponements at all. C&A, via COFRA Holding, is under the exclusive ownership and control of the Brenninkmeijer family. The Brenninkmeijers are the richest family in the Netherlands. Recently available reports put the family’s wealth at $22 billion. It is self-evident that billionaires should not be seeking to offload the economic burden of the pandemic onto workers in Bangladesh and Cambodia who subsist on a few dollars a day.
Ross Stores reneges on commitments to factories
May 8, 2020As was previously reported in the press, Ross Stores, Inc., a chain of US-based clothing and home goods stores, which produces both in the United States and abroad, canceled completed and in-process apparel orders and demanded extended payment timelines from suppliers on orders already shipped from its suppliers.
Ross’s refusal to meet its obligations was first revealed in a letter to suppliers reported on in late March. The WRC responded to Ross’s letter to factories with a request for information clarifying whether, indeed, Ross planned to cancel orders or request discounts on previously agreed upon prices, harming suppliers and workers. This request went unanswered by Ross.
Now, the WRC has received reports from suppliers confirming Ross’s large-scale cancellation of orders and the decision to extend payment terms. This will leave suppliers, in turn, unable to pay workers, potentially resulting in mass layoffs and undue hardships on workers in a time of crisis.
Bestseller is imposing partial order cancellations and retroactive price cuts across its supply chain
May 5, 2020
Bestseller is imposing retroactive price reductions, retroactive order cancellations, and long delays in payment of invoices, across its supply chain. Suppliers report Bestseller canceling up to 20 percent of orders already completed or in process, without compensation, and imposing price cuts of up to 25 percent on the orders it is accepting. All of this is exacerbated by the company’s imposition of a 90-day delay in all payments to suppliers, without providing financing to enable suppliers to weather the delay.
Trying to put the best possible public face on these destructive practices, Bestseller describes its policy as follows: “Bestseller is committed to accept delivery of orders already made and those in production through individual dialogue with all suppliers.” What is missing from the statement is a commitment to pay in full for these orders. Instead, Bestseller, through “individual dialogue”, is telling suppliers they must accept retroactive cancellations and price reductions on its orders, which vary in size from supplier to supplier and which, in the aggregate, constitute a huge financial blow to Bestseller’s supplier base and to the workers who make its clothes.
Bestseller insists that it has “not cancelled orders unless it has been in agreement with the given supplier” (emphasis added). When Bestseller retroactively cancels an order, in part or in whole, this means large financial losses for the affected supplier. No supplier would voluntarily agree to accept such losses, allowing a customer to ignore its contractual obligations at the suppliers’ expense. Suppliers are agreeing to sacrifice their own bottom line to bolster Bestseller’s because they believe they have no choice—that if they do not accept Bestseller’s terms, Bestseller will not give them business in the future. Unfortunately, the balance of power in apparel supply chains allows buyers to impose their will on suppliers, a dynamic that is playing out across global supply chains, at enormous cost to suppliers and to workers.
Bestseller says it is “actively tracking that workers are paid in due time in all factories working with Bestseller, and will continue to follow this process carefully over the coming months.” Notably, Bestseller does not say what it will do if workers, as a result of Bestseller’s price cuts and order cancellations, are not “paid in due time”. As research by the Center for Global Workers’ Rights has shown, the refusal of brands like Bestseller to honor their obligations, and pay in full, causes factories to suspend or fire workers, often without pay. If Bestseller wants workers to be paid on time and to continue to have jobs in the months ahead, it will pay in full, and on time, for all of the clothing it ordered.
Walmart subsidiary Asda abandons suppliers, despite packed stores
May 1, 2020
Asda, a UK-based supermarket chain and a subsidiary of Walmart, is refusing to meet obligations to suppliers producing for its George brand of apparel. Thus far, Asda has not made any public statements concerning its policy on payment for orders, but its actions have been revealed by suppliers around the world. Asda is refusing to accept up to 20 percent of orders that suppliers had already shipped to Asda before the crisis began. Asda is also demanding 40 to 70 percent price reductions on orders completed but not yet shipped and on in-process orders. This makes Asda one of the worst actors in the industry.
Unlike most apparel retailers, Asda has been allowed to keep its stores open throughout the crisis and thus does not face the same financial challenges confronting many of its competitors. It is difficult to see any explanation for Asda’s behavior other than an unfortunate combination of opportunism and indifference to its ethical obligations and to the consequences for workers.
Suppliers have not reported similar problems with orders produced for Walmart, but Asda’s misdeeds are nonetheless the responsibility of its American corporate parent. It is also important to note that Walmart, while it is apparently not canceling orders for its private label brands, has canceled orders placed with third-party, name-brand vendors with serious consequences for those vendors and the suppliers and workers that make their goods.
Primark is better at public relations than at honoring its obligations to suppliers and workers
April 29, 2020
Notwithstanding Primark’s April 20 announcement that it will pay for some apparel orders it previously canceled, the company remains on the list of brands and retailers that have not committed to honor their obligations in full. Though public pressure has led Primark to improve its position somewhat since the outset of the crisis when it canceled orders across the board without payment, its current approach falls well short of a commitment to pay in full for all orders in process or completed.
In its announcement, Primark pledged to pay for about $460 million dollars in orders it had previously canceled. Primark did not, however, disclose what percentage of its total unpaid commitments this figure represents. It is clear from communications with suppliers that there are additional orders, worth hundreds of millions of dollars more, for which Primark has made no commitment to pay. This will mean large-scale financial damage for suppliers and lost jobs for workers.
Moreover, on the orders for which Primark has agreed to pay, it is doing so on a drastically delayed payment schedule. Primark itself won’t pay a penny for any of these clothes until autumn 2020, preserving its own cash flow, and that of its already cash-rich corporate parent, Associated British Foods, at the expense of suppliers a tiny fraction of their size.
As a result of the unpaid commitments and the extensive payment delays, many Primark supplier factories will likely close and terminate workers en masse.