The global shutdown of retail and garment manufacturing due to the coronavirus outbreak quickly revealed weak spots in vendor and customer relationships. Delayed payments and the cancellation of finished goods continue to strain garment suppliers, while several big fashion brands have landed in hot water for reneging on payments, including Levi Strauss & Co.
The denim giant, however, said it is resolving its payment issues. In a statement, LS&Co. said it is taking full responsibility and paying in full for all finished, ready-to-ship orders and in-progress garment production. The company also plans to use raw materials already received by suppliers for product orders in later seasons.
“While we extend our payment terms, we believe our current terms are consistent with industry practice, and we have not asked for any discounts on payments,” LS&Co. stated in a press release.
The statement echoes a what a Levi’s spokesperson told Sourcing Journal in June and follows months of mounting pressure by nonprofit Worker Rights Consortium (WRC), which began tracking which brands are responding responsibly toward suppliers and workers during the coronavirus crisis.
LS&Co. was previously named on a list of brands that have not made sufficient commitments to pay for orders, on time and in full. WRC said LS&Co.’s decision to delay payments to all suppliers relative to agreed terms placed suppliers’ cash flow and their ability to pay garment worker wages at risk.
In the release, LS&Co. pointed out that its program with the International Finance Corporation (IFC) allows suppliers to get early payments at favorable market rates. The company said the majority of its products are made by suppliers with access to the program, however, IFC claims “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.”
LS&Co. said it provided additional assistance to suppliers not in locations served by the IFC program, and continues to explore “collective industry efforts to support suppliers and their workers.” The Levi Strauss Foundation also announced in April that it is granting $1 million to address health, food and safety-net needs facing apparel workers in sourcing communities.
Many fashion brands remain on WRC’s list of companies that have made no commitment to pay in full for orders completed and in production. They include Arcadia (which owns Topshop), Anthropologie, Bestseller, Gap, Li & Fung/Global Brands, Primark and more.