The World Health Organization (WHO) declared COVID-19 a global pandemic on the 11th of March 2020 and what followed subsequently was nothing short of sheer devastation as hordes of retailers in Europe and USA shut down stores and filed for bankruptcy, the ripple effect of which were felt far and wide across the supply chain and more intensely by the garment makers, who owe their business existence to the brands and retailers.
As per reports, the pandemic has been especially harsher on fashion brands and retailers as stay-at-home orders enacted from mid-March last year forced major companies to close down operations and they struggled to survive. With scores of big names filing for Chapter 11 and those who managed to stay afloat witnessing their revenues taking a tumble, all of these combined to hit hard the garment makers in Bangladesh.
When the pandemic hit, buyers began cancelling orders on a huge scale, and since then, the garment industry has been struggling to recover from COVID-19 related challenges even as workers in thousands if not lakhs have been rendered jobless in the wake of the pandemic while a substantial chunk of the small and medium-level players, which added vibrancy to the dynamic apparel manufacturing sector in Bangladesh, bowed out of business for good.
If order cancellations were not all, according to reports, scores of major brands and retailers, including Sears, Forever 21, Ross Dress for Less, The Children’s Place, Kohl’s KSS, Global Brands Group and Arcadia (owners of Topshop), refused payment to factories on US $ 40 billion worth of completed goods, leaving factories facing down bankruptcy and pushing garment workers out onto the street even if luckily over two-dozen large brands, including H&M, PVH Budish, VF Corporation VFC, Zara and C&A, reinstated and paid for orders after international pressure last year.
Subsequently though, substantial number of cancelled orders were reinstated.
However, the large-scale bankruptcies among the retailers in the West and subsequent payment failures and defaults weighed so heavily on the pandemic-stricken garment exporters that it even led a group of Bangladeshi garment suppliers, who were severely hit by Coronavirus and unethical business practices of Western clothing giants, to file a case and even secure a rare victory in a US $ 40 million lawsuit against US clothing giant Sears.
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Thereafter, with mass vaccinations in the Western countries, things started to improve as retail chains resumed operations and demand for clothing among the end-consumers started rising once again which gave a ray of hope to the beleaguered Bangladeshi garment exporters. After a protracted pandemic-induced downturn, exports showed signs of rebound, raking in US $ 38.75 billion in FY ’21, recording a growth rate of 15.10 per cent, riding high on RMG export recovery, which earned US $ 31.45 billion showing a 12.55 per cent growth, according to the figures of the Bangladesh’s Export Promotion Bureau or the EPB.
This is no mean feat considering the fallouts of the pandemic, when many economies in the world faced challenges of Coronavirus shutdowns and trade disruptions.
Nevertheless, even when things were making a turnaround for good came in news of a worrying development somewhere in July when Western media reported that the North American arm of Global Brands Group (GBG) has also filed for Chapter 11 bankruptcy.
As per reports, in a court filing in the New York Southern District Bankruptcy Court, GBG USA Inc. disclosed 1 billion and 10 billion dollars in assets and liabilities, and listed between 1000 to 5000 creditors even if they reportedly owe top creditors large sums of money, including US $ 6 million to Kenneth Cole and US $ 3.6 million to Authentic Brands Group.
Global Brands Group is hoping they’ll resume business as usual after their bankruptcy process and are planning to use the bankruptcy sales process to unload assets like inventory. The company is also hoping to sell off assets including that of Ely & Walker, Airband, Magna Ready, Yarrow, B New York and Juniperunltd brands, maintained the reports while adding the company was also planning to sell its Aquatalia footwear brand, with Windsong Global LLC seen as a leading contender to purchase the brand.
It may be mentioned here that Global Brands Group, like most fashion companies, was greatly impacted by the COVID-19 pandemic even as global political issues were said to have also affected Global Brands Group’s supply chain.
In its financial filing, Global Brands Group revealed that they have lost around 204 million dollars for the year ended in March 2021, which accounts for 92 per cent of GBG’s operating losses.
Back home in Bangladesh, as per reports, GBG USA sourced apparels from at least 10 factories and payments to several of these factories were said to be pending even as the bankruptcy of Global Brands Group (GBG) Holding Limited’s American subsidiary has stoked apprehensions among Bangladeshi manufacturers who are owed money by the apparel and footwear wholesaler.
According to the company’s websites, GBG USA is an associated organisation of Hong Kong-based Fung Group and they reportedly supply footwear and apparel wholesale to Macy’s Inc, Nordstrom Inc, and other US department stores as well as warehouses, off-price retailers and Amazon.com Inc even as the company reportedly maintained that the retail landscape has been greatly impacted by COVID-19, creating hardships for them to survive; moreover, structural shifts in the retail industry and disruptions of supply chain have also become detrimental for GBG USA.
Meanwhile, speaking to the media, Vice-President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Shahidullah Azim, reportedly stated: “This buyer used to source apparels from 10 to 12 apparel factories of our country. We are keeping an eye on the whole matter. We will take necessary steps so that our entrepreneurs do not face any financial losses due to the bankruptcy of GBG.”
It may be mentioned here that BGMEA, as the apex garment makers’ body in the country has been fighting the just cause of garment makers since last one year to make sure that they get their pending dues even as at one point in time, it also warned the errant buyers with blacklisting if they failed to pay their suppliers on time.
As per reports, Li and Fung, another subsidiary of Fung Group, also sourced apparel items for GBG USA from Bangladesh and Rising Group, a Mirpur-based BGMEA-listed apparel factory, has reportedly shipped apparel items to GBG USA through Li and Fung for seven years even as it shipped garments worth US $ 160,000 to GBG last year at a discounted price amid the outbreak of the pandemic, as per the Managing Director of the company, Mahmud Hasan Khan.
“Clothes worth US $ 293,000 manufactured against the company’s order have been lying in the warehouse for a long time, resulting in losses worth Taka 2.5 crore for Rising Group,” reportedly claimed Khan interacting with the media and adding that GBG told them to wait, so for a long time, the products have been lying in the warehouse.
“As they are now bankrupt, we have to send the designs to other buyers and try to sell it to them,” he further said even as on the issue of pending payments, he reportedly said that they have contacted the Singapore-based representatives of the company.
Usually, employees and warehouse owners of the bankrupted company receive arrears after the sale of the property and then if there is anything else left, the sourcing company might get it, though the sum is very little.
As per reports, GBG USA had ordered products from Chittagong-based apparel factory Denim Expert Limited Reports worth US $ 2.4 million in late 2019 even as the company had also managed to ship the products before the outbreak of COVID-19 but GBG USA reportedly delayed taking the products when the pandemic hit the US.
Subsequently, Denim Expert reportedly tried to put pressure on GBG USA trying to highlight this issue in both local and foreign media outlets on the issue, after which the American company reportedly started taking the products even as the factory finally reported receiving payments one-and-a-half years after the purchase order was first made.
Going by these reports which does not paint a very rosy picture of GBG, garment makers in Bangladesh, especially those supplying to it, seem to have enough reasons to brace up for some tough times going ahead!