Updates and Analysis
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.