Blog: Michelle RussellRetail in spotlight as bankruptcies stack up

Michelle Russell | 18 May 2020

The impact of the coronavirus (Covid-19) pandemic is starting to be felt more heavily across the retail sector with more bankruptcies emerging. Stage Stores and luxury department store retailer Neiman Marcus are the latest to file for Chapter 11, while Canada-based footwear retailer and distributor Aldo Group has filed for creditor protection in order to restructure its business.

In Bangladesh, almost 70 jobs have been lost after British retailer Debenhams liquidated its sourcing operation following its collapse into administration last month.

Other retailers, meanwhile, are looking to take advantage of opportunities likely to emerge in the global fashion industry over the coming month. Online fashion retailer Boohoo has raised GBP197.7m (US$241.4m) through a share placing to help it fund future acquisitions.

Even as the global pandemic continues, the economic imperative to reopen businesses is being felt in every part of the world and nowhere more so than in countries like Bangladesh, where the impact of Covid-19 could roll back more than a decade of gains in poverty reduction.

An Indian clothing supplier to international brands told just-style of the challenges it faces as it starts to emerge from the near complete lockdown that prevented work being completed on summer collections.

In Central America, nearly 50,000 garment workers in El Salvador, 26,000 in Honduras and 6,000 in Nicaragua are being laid off with no paycheck, trade union officials say. They are stepping up calls for governments and fashion brands to help compensate and provide a livelihood for impoverished sewers until the pandemic recedes.

Covid-19 will not just threaten business failure for many clothing brands and manufacturers, it may herald the end of the current high production, fast fashion model and result in fewer, smaller collections from more sustainable supply chains.

The CEO of WRAP, Avedis Seferian, and the SVP of policy at the American Apparel and Footwear Association (AAFA), Nate Herman, believe the pandemic is going to force many changes in the way clothing factories have operated for hundreds of years and companies must start to consider the steps they can take to safeguard workers as facilities begin to come back online.

New data shows the pandemic will wipe off US$297bn from the global apparel market in 2020 – a 15.2% decline on 2019. The ten worst impacted markets, in terms of value, will represent 85% of this total loss, with mature markets suffering the hardest – the US will account for 42% of all lost spend, which will contribute to more major chains filing for chapter 11 over the next few months.

Five associations representing the cotton and textile industry have joined hands on a call for fair and equitable trade practices across global supply chains amid the coronavirus.

The pandemic, however, has proved a mixed blessing for Hong Kong-based garment supplier Esquel. While export earnings have plummeted, the company has pivoted by adding non-medical use face masks to its product line, which it will sell under the company's own label Determinant.

Meanwhile, if non-governmental organisations (NGOs) wish to remain relevant – and productive – they need to press their case now. Otherwise the fashion industry will go back to its old ways of doing business in a post-Covid world.

In other news, the UK government has rolled out financial support for garment businesses with "vulnerable supply chains" in developing countries, Kingpins has outlined plans for the next edition of its online-only event, TM Lewin has been acquired by Torque Brands, and Li & Fung has been given the green light by shareholders to take the company private.

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