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Report: Kohl’s Has Millions for Shareholders—But Not for Suppliers

Kohl’s is under fire for allegedly nixing millions of dollars worth of orders from garment factories in Bangladesh and South Korea mere weeks before shelling out $109 million to its shareholders.

The department store chain canceled orders worth $100 million from South Korean factories and $50 million from Bangladeshi factories as the coronavirus outbreak deepened into a pandemic in March, the Guardian reported Wednesday.

Kohl’s, the manufacturers say, acted unilaterally without consulting them. It also rebuffed petitions from suppliers—some of which had been doing business with Kohl’s for more than two decades—seeking a renegotiation of payment terms.

Kohl’s did not immediately respond to a request for comment.

“Brands like Kohl’s say they care about workers, and use their big name to talk about ethical sourcing. But it is a lie,” Kalpona Akter, the founder of the Bangladesh Centre for Worker Solidarity, a union for garment workers, told the Guardian. “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.”

The same month, Kohl’s furloughed 85,000 of its roughly 122,000 employees, and shuttered all 1,159 of its stores. (It has since reopened stores in 14 states as part of what it calls a “phased approach.”) On April 1, the retailer paid out $109 million in dividends to shareholders.

In a letter to Kohl’s leadership obtained by the Guardian, the Korean Federation of Textile Industries urged the retailer to honor its obligations with suppliers instead of invoking force majeure clauses in its contracts to renege on paying for clothing that had already been made and was ready to ship.

Kohl’s reported a net income of $691 million for the 2019 fiscal year, down 14 percent from $801 million the year before. The retailer also sources clothing from countries such as Haiti, India and Vietnam.

The retailer is among other non-payers and payment laggards in the Workers Rights Consortium’s (WRC) “COVID-19 tracker.” Others include Topshop operator Arcadia Group, Bestseller, C&A, Gap, Levi Strauss, Walmart-owned Asda and fellow department stores J. C. Penney and Sears. (Transformco, Sears’ parent company, is being threatened with a $40 million lawsuit from unpaid Bangladeshi suppliers.)

“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,” WRC executive director Scott Nova told the Guardian. “[Kohl’s] has refused to pay for apparel that it ordered and that workers have already made, but the company somehow found $100 million to reward shareholders.

“It’s hard not to think of these actions as nothing more than a form of robbery,” he added.

Labor rights advocates, such as the nonprofit Fair Wear Foundation, have described the issue of canceled orders, shut-down factories and vanished incomes as a human-rights crisis in the making, putting millions of lives at risk of destitution and starvation. Bangladesh’s garment sector, the second-largest exporter of clothing after China, has already laid off or furloughed at least 70,000 of its 4 million workers, according to some human-rights groups. The Center for Global Workers’ Rights at Penn State University says at least 1 million garment workers have already been affected.

To date, brands and retailers have canceled more than $3 billion in orders—the equivalent of 982 million garments, according to the Bangladesh Garment Manufacturers and Exporters Association, the country’s largest trade group for factory owners. Rubana Huq, the group’s president, says the industry could be looking at $5 billion in “irrecoverable losses” by the end of the fiscal year. Garments ordinarily account for roughly $34 billion or 84 percent of the country’s overall exports.

South Korea’s textile industry employs 278,000 workers, according to the Korean Federation of Textile Industries. In 2018, it produced goods worth 39,393 billion won ($32 million).

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