"Fashion’s $40 Billion Cancellation Spree Leaves Suppliers Footing the Bill", 14 December 2021

[...]

The fact that fashion owes $18 billion in outstanding payments is remarkable in light of the “pretty strong economic comebacks” that many brands have experienced since the release of Covid-19 vaccines, said Vincent DeLaurentis, director of outreach at the Worker Rights Consortium (WRC). An upcoming report by the Washington, D.C.-based think tank...will describe how brands’ actions violated their due-diligence obligations under international instruments governing responsible business practices, including the United Nations Guiding Principles on Business and Human Rights and the Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises...

The report flagged Kohl’s for paying shareholders $109 million in dividends just weeks after canceling more than a billion dollars in goods, much of which had already been manufactured, at the outset of the pandemic...

URBN, which owns Urban Outfitters, Anthropologie and Free People, was likewise “very intransigent” in its refusal to clarify its position on order payments, even though it borrowed $220 million at the start of the pandemic to preserve its cash flow. Supplier factories also complained to WRC that URBN has been “finding loopholes not to pay,” claiming, for instance, that a color is wrong or that it wants a different shade of red.

Other companies that demanded sizable discounts include Asda, which was a Walmart subsidiary at the time, Bestseller and American Eagle Outfitters. Asda imposed 40 percent to 70 percent price reductions on orders completed but not yet shipped and on in-process orders, the report said, while Bestseller suppliers told WRC that the company imposed discounts of up to 10 percent on some orders that were in production in early 2020. In April of the same year, Li & Fung told some American Eagle Outfitters suppliers that the company was levying a 20 percent price reduction on certain categories of apparel.

The Children’s Place...not only canceled millions of dollars’ worth of clothing orders from suppliers in Ethiopia, according to the report, but it also demanded retroactive rebates on products that had shipped before Covid-19 reared its head. Edinburgh Woolen Mill canceled and refused to reinstate orders, then warned the Bangladesh Garment Manufacturers and Exporters Association of legal consequences if it continued to speak to the press and campaigners. The trade group responded by threatening to blacklist Edinburgh Woolen Mill, which collapsed into administration a few months later. Other companies such as Esprit and JCPenney have cited bankruptcy as a reason for reinstating orders.

The issue of obfuscating responsibility also extends to the upper echelons of retail, DeLaurentis said. WRC placed brands such as Balmain and Oscar de la Renta on its “naughty list” because they’ve been non-responsive to attempts at engagement. Researchers also weren’t able to confirm that the companies were paying their workers despite their American arms receiving Paycheck Protection Program loans...

Of the companies mentioned, only a handful responded to requests for comment.

A spokesperson for American Eagle Outfitters said that although the company negotiated a “one-time discount on a small amount of unshipped orders” in April last year, it continues to take deliveries and pay invoices immediately. Bestseller told Sourcing Journal that it does not have any unresolved issues with any of its suppliers “related to last year’s disruptions caused by the pandemic.” Neither has it made hard cancelations or delayed payments.

A JCPenney representative also disputes WRC’s characterization, saying that the retailer has reinstated all previously delayed merchandise and paid suppliers in full with no discounts. The Children’s Place told Sourcing Journal that it has worked collaboratively with its vendors to compensate them in full for any canceled in-production and finished orders.

DeLaurentis said that the backlash to the cancelations has been such that few, if any, brands are yanking orders en masse the way they did last year. Instead, he said, they’re finding other ways to squeeze suppliers by insisting on lower prices or extending payment terms “well beyond what’s normal for the industry.”

“What we’ve seen especially recently is that brands are really hesitant to put in large orders or put in orders far out in advance because of the economic uncertainty and evolving health situation around the world,” he said. “So what brands are doing is they’re giving factories smaller orders and demanding shorter lead times, which is obviously putting additional pressure on the workers and constraining factories’ abilities to hire workers back if they laid them off during the pandemic.”

[...]