More bad news for two beleaguered British brands.
On Wednesday, the Ethical Trading Initiative (ETI) suspended Missguided following its collapse into administration and subsequent purchase by Sports Direct owner Frasers Group.
The multi-stakeholder organization, which works to end human-rights abuses in the workplace, called the fast-fashion e-tailer out for “unsatisfactory performance.” Missguided has been a member since 2017.
“We have been made aware of the company’s commercial struggles in the last year and this week learned that they have been placed into administration,” the organization said. “We understand this is the result of considerable debts to suppliers. Debts of this nature place garment workers, already subsisting on low wages, at an increased risk of unpaid work. We have reached out to the company without success and will be suspending their ETI membership.”
The decision whether to terminate an ETI member or not lies with the ETI board, which meets in June, it added.
Missguided’s demise has yoked dozens of its suppliers, both domestically and abroad, with tens of millions of pounds in unpaid orders, some stretching back to January. A number of them, mostly in Leicester, have filed an official complaint to the Insolvency Service. They’re also mulling legal action after the company’s actions have plunged them into dire financial straits. Some factories may have to close, leaving hundreds of garment workers unemployed during a cost-of-living crisis.
“Unfortunately, this case raises familiar issues, that risks and costs within the fashion industry are too often passed onto suppliers, with long payment terms and unfair purchasing practices that ultimately cost workers,” ETI said. “When a brand goes into administration, suppliers are typically left with little or no chance of payment, and certainly not at full value. This translates into significant financial loss, unpaid wages for workers and often loss of employment. This is not a fair share of the risks of doing business.”
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Though Frasers Group is not a member of the ETI, any “responsible” business acquiring a company out of administration needs to adhere to international labor standards, including the United Nations Guiding Principles on Business and Human Rights, the ETI said. This means compensating suppliers for work completed so that they, in turn, can pay their own workers. Companies should also take steps to mitigate any existing debts, remedy their negative impacts on workers to date and ensure that future operations avoid debts in the first place. And wherever possible, they should engage with trade unions and worker representatives to make joint decisions.
These are “unusually strong words” from the ETI, which is a “good sign that companies going bankrupt without due any concern for supply chain workers is beginning to be recognized as a serious breach of due diligence and not simply a commercial issue,” Dominque Muller, policy director at Labour Behind the Label, told Sourcing Journal.
The Bristol-based worker rights group said it’s still hoping to hear from the government about what actions it will be taking to ensure debts are paid and workers are protected.
“So far we have heard nothing despite the fact Missguided continued to rack up debts right up to the last moment with no communication with suppliers—essentially selling clothes made by unpaid suppliers right up until the last moment,” Muller said. “We also hope that the Frasers Group will ensure they take care of unpaid bills and not simply continue with this exploitative model endemic in the fashion industry.”
Frasers Group did not immediately respond to a request for comment. On Friday, Missguided’s flagship website was “under maintenance.” Its U.S. online storefront is no longer operational.
Over in Bangladesh, a Dhaka court has imposed a temporary injunction on both Peacocks and its parent company, Edinburgh Woollen Mill (EWM) Group, from doing business with any of the country’s factories.
The move comes three months after four local suppliers filed a legal complaint against EWM Group for allegedly failing to pay more than $689,000 in goods that they had shipped in 2019.
Imtiaz Moinul Islam Neelim, counsel for Bangladesh Garment Manufacturers and Exporters Association, the country’s largest trade group for apparel factory owners, said that the EWM Group deliberately filed for bankruptcy to avoid paying its debts.
Following Peacocks’ collapse into administration in 2020, EWM Group reportedly told Designtex Knitwear, Designtex Fashions, Knit Bazaar and Bottoms Gallery Limited that it was no longer on the hook for the sum. But Neelim previously told Sourcing Journal that financial documents reveal that Purepay Retail and Anglo Global, Peacocks’ current owners, are all part of the EWM Group, which is owned by British billionaire Philip Edward Day.
“It has been observed that Peacocks, Purepay and Anglo Global are in fact parts of the EWM Group,” he told Sourcing Journal. “Declaring a company of the same group bankrupt and then purchasing the same through two other companies of the same group in order [to deprive] all creditors of their debts is nothing but fraud and Mr. Philip Day, along with the EWM Group, are obliged to pay the dues owed by EWM and Peacocks.”
Edinburgh Woollen Mill did not immediately respond to an email seeking comment.