Kohl’s cancelled $50m Bangladesh orders before big dividends

Kohl’s, one of the US’s largest clothing retailers, cancelled millions of dollars worth of existing orders from Bangladeshi and Korean garment factories just weeks before paying out $109m (£85m) in dividends to shareholders, The Guardian reported on Wednesday.

The company cancelled orders of clothing worth approximately $100m from Korea and $50m from Bangaldeshi factories after the Covid-19 pandemic struck, and refused petitions from suppliers asking for the option to renegotiate payments. 

The clothing companies say that Kohl’s announced its decision to cancel all orders it had already placed with its global suppliers in a conference call on 22 March. They say the US company acted unilaterally without consulting or negotiating with suppliers, some of which have been doing business with Kohl’s for more than 20 years. Kohl’s also furloughed 85,000 US staff and shuttered its 1,159 stores.

On 1 April, Kohl’s, which is worth $2.16bn, paid out $109m in dividends to shareholders.

Kohl’s did not respond to the Guardian’s request for comment.

Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said that similar actions by brands has already led to thousands of garment workers losing their jobs and factories closing. 

According to the BGMEA, up to 500,000 workers could lose their jobs in June if commitments to pay for ordered stock that was in production when the epidemic struck are not honoured.

“Brands like Kohl’s say they care about workers, and use their big name to talk about ethical sourcing. But it is a lie,” said Kalpona Akter, the founder of the Bangladesh Centre for Worker Solidarity, a union organisation supporting garment workers. “They cancel orders and refuse to pay for orders produced. When we need them most, they turn their backs. They need to do the right thing. They need to pay their bills.”

In a letter to Kohl’s executive board seen by the Guardian, the Korean Federation of Textile Industries has also appealed to Kohl’s to honour its existing agreement with suppliers and not use “force majeure” clauses in contracts to avoid paying for clothing already made and ready to ship.

Kohl’s is a behemoth among department store retailers in the US. It has remained profitable in a time when competitors such as JC Penney and Sears have slipped into bankruptcy. Between 2017 and 2019, Kohl’s paid dividends to its shareholders worth $1.2bn. As well as buying from suppliers in Bangladesh and Korea, Kohl’s sources clothing from other countries including Haiti, Vietnam and India.

Scott Nova from the Worker Rights Consortium (WRC), said that Kohl’s actions were tantamount to exploitation and exposed the huge power imbalance in the global garment supply chain 

“Kohl’s puts a grossly one-sided cancellation clause in its purchase agreements, allowing it to cancel, and refuse to pay [suppliers] when it decides to,” he said.

 “[The company] has refused to pay for apparel that it ordered and that workers have already made, but the company somehow found a $100m to reward shareholders. It’s hard not to think of these actions as nothing more than a form of robbery.”

Bangladesh relies on the garment industry for more than 80% of its exports and its 4,000 factories employ 4 million people, many of whom are single mothers and young women. 

Known for its “fast fashion” turnout, Bangladesh has been badly hit by the economic fallout from Covid-19. Exports plummeted 84% in the first half of April, with $3.18bn-worth of orders cancelled or suspended.

One worker, Hasina, who worked in a factory supplying Kohl’s, is pregnant and lost her job in April. 

“They fired me in the same way they fired my other pregnant colleague,” she said. “They did not pay us our wages, compensation or benefit, which I was owed after six years working there. The factory told us brands have cancelled or suspended goods that were ready to deliver. 

“I have given all my energy making clothes for very low wages. Manufacturers and fashion brands can profit off the clothes, but nobody cares for us when we are suffering.”