Levi Strauss had cancelled orders worth $5.29 million with Bangladesh factories, while Gap Inc cancelled orders of $21.53 million
Two major US retailers – Gap Inc, and Levi Strauss & Co – have announced to support their suppliers throughout the Covid-19 pandemic and take all goods they ordered with full payment.
Levi made the announcement on July 2 and Gap followed suit eight days later.
Gap Inc, which owns brands including Old Navy, Gap, Athleta, and Banana Republic, said in a statement on Friday that it would work with vendors to compensate them – in full – for finished goods and goods in production that were cancelled or subject to pack and hold.
The clothing retailer has extended payment terms on certain orders, but in the immediate term, it is providing low-cost financing to vendor partners, the statement added.
Bangladeshi apparel suppliers expressed their gratitude to both retailers for acting as good business partners during the pandemic.
"Two US retailers announcing to take all goods sends a positive message; it will restore hope among suppliers," said Abdus Salam Murshedy, president of the Exporters Association of Bangladesh and former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
"Many suppliers have been in business with these retailers for long, so we expect responsible behaviour from them," said Murshedy, who is also the managing director of Envoy Textiles Ltd, a major denim fabric supplier of Levi Strauss.
Gap Inc is also working with its banking partners to increase the amount of funds available within the programme as it moves forward, the statement reads.
Salam Murshedy said in most cases where Gap Inc deferred payments, buyers were usually paid within 45 to 65 days of shipment. But it will now take more time.
Seeking anonymity, a Gap supplier said, "Finally, Gap sourcing head Christophe has informed all suppliers that the discounts earlier enforced on all shipments will be paid back in February 2021."
BGMEA data shows the fashion retailer has cancelled orders worth about $21.53 million, affecting 30 factories. According to its factory list updated on March 2020, the company has business with 45 Bangladeshi garment factories.
"Gap is issuing a purchase order (PO) for all those cancelled orders as well and taking them gradually. It has rented a new warehouse for storing all the cancelled goods," the supplier added.
The statement by Gap noted that the number of cancelled purchase orders is "lower than 3 percent of purchase orders by value for finished garments and garments in production."
The retailer also said it is working with vendors to explore liquidation opportunities for these finished garments.
"We are working with our vendors and suppliers to utilise uncut raw materials for future seasons," Gap Inc added.
Levi Strauss wants to pay full
US retailer Levi Strauss & Co wants to take full responsibility – and pay in full – for all finished, ready-to-ship orders and in-progress orders, reads a statement.
Levi's has cancelled orders worth about $5.29 million with nine garment factories; its annual business turnover is about $300 million in Bangladesh, said industry insiders.
The company also plans to use raw materials already received by suppliers for product orders in later seasons, the statement added.
The retailer also extended its payment terms adding, which it believes "are consistent with industry practice."
"We have not asked for discounts on payments. Our sourcing leads are staying in close conversation with suppliers and we are factoring their circumstances into our decisions."
The US denim giant said it has had a programme with the International Finance Corporation since 2014 to provide suppliers with access to loans at favourable market rates.
"The majority of our products are made by suppliers with access to the programme and more will soon have access," Levi Strauss said in its statement.
"As our stores and wholesale partners open back up, we are starting to see demand come back and production turning back on. In addition, we have shared, and will continue to update, health and safety guidelines related to Covid-19 with suppliers that remain open or that will soon re-open, as government regulations permit," the company further said.
The Levi Strauss Foundation had announced in early April that it was granting $1 million to address health, food and safety net needs apparel workers facing in sourcing communities, with a focus on women.
The clothing company has recently announced that it plans to axe approximately 700 people from its corporate workforce, which represents about 15 percent of its global non-retail, non-manufacturing headcount.
The jeans brand reported a net loss of $363.5 million for the second quarter.