The Children’s Place (TCP), the largest childrenswear retailer in the US has cancelled millions of dollars worth of clothing orders from suppliers in Ethiopia because of the coronavirus pandemic, pushing companies into debt and leaving employees facing pay cuts.
TCP, which has more than 1,000 stores in the US and 90 around the world and had a turnover of $2bn (£1.5bn) last year, cancelled orders from Ethiopia in March and delayed payments by six months for orders completed in January and February, suppliers told the Guardian.
Ethiopian workers are the lowest paid in the global garment supply chain. According to a report by the NYU Stern Center for Business and Human Rights, the minimum wage for Ethiopian garment workers is $26 a month, compared with $95 in Bangladesh and $326 in China.
Ethiopian suppliers claim that TCP has demanded retroactive rebates on products that had been shipped before the crisis. They said the company cited the force majeure clause (which frees companies from contractual obligations in the case of certain extreme events) in its contracts as a reason not to pay, due to Covid-19.
In a statement, Gregory Poole, TCP’s chief supply chain officer, said the company had cancelled fewer than 3% of orders from Ethiopian suppliers.
Suppliers said the cancellations have had serious consequences for their businesses.
Some producers said they have been unable to pay their lenders due to the cancellations, which has left them crippled with debt after already buying raw materials and paying workers. Others have said the cut in orders was enough to wipe out their profits for the year.
One supplier told the Guardian his company had lost its credit line after losing nearly $1m because of contract cancellations.
“We are a company with 95% women workers. Some [of the workers are] mothers,” the supplier said. Asked what the company could do legally to recoup the hundreds of thousands of dollars lost, the supplier responded: “How do you fight such a big US corporation? They have endless pockets.”
Another supplier said that although TCP had started to pay back some money for the cancelled orders, the company still owed it hundreds of thousands of dollars.
The Children’s Place is one of four leading US apparel brands sourcing goods from Ethiopia, alongside PVH, JC Penney and H&M. In its annual report last year, TCP cited Ethiopia as a “key sourcing region”. The Worker Rights Consortium said at least seven factories in Ethiopia were producing clothing for TCP stores, employing about 15,000 workers.
In 2016, the Ethiopian government opened its flagship Hawassa Industrial Park to help boost Ethiopia’s economy through tax breaks for business and jobs for its growing population. Most of the country’s garment workers are young women who have migrated from poor rural areas.
But the pandemic has derailed the government’s plans. In April, the International Monetary Fund downgraded Ethiopia’s 2020 economic growth rate from 6.2% to 3.2%.
Aida*, 20, who has worked for a factory that produces clothing for TCP for three years, said her wages had been cut from $26 a month to $10 since March. She said her employers had told workers the company might go bankrupt because of the volume of lost orders.
“I am afraid I am going to lose my job because of the crisis and get expelled from my house when I can’t afford to pay my rent. Since the factory has stopped providing transportation I get up earlier and walk to work. It takes me around 50 minutes to get to the factory. The days I skip meals has become more frequent … I used to eat vegetables but now I usually consume only cornflour meals.”
Tamru*, 22, who works at the same factory, usually makes $27 a month, working nine hours a day, six days a week. He must pay for his own housing. Since orders were cut, the company stopped supplying buses to transport workers to the factories, and his wages have been cut in half. He told the Guardian that this had made buying basic food unaffordable.
“I can’t eat whenever I want to eat,” he said. “I sometimes skip dinner. I walk from home to work every day because the factory has stopped providing transport service and I can’t afford to pay for a bus. My work is so exhausting, I never sit, and the pay is very small to cover my expenses.”
Coronavirus has had a damaging effect on TCP, resulting in the temporary closure of stores and overall financial losses.
Scott Nova, executive director at the Worker Rights Consortium, said: “We understand that The Children’s Place faces real financial challenges during this time. But this just represents a small fraction of their total cancellations globally. There are other brands, like PVH and H&M that have stepped up to pay. So can TCP, and they should.”
TCP declined to address specific claims made by suppliers to the Guardian, but Poole said in the statement: “In early April, as a result of the nationwide shutdown and the global uncertainty regarding the Covid-19 pandemic, we cancelled less than 3% of our Ethiopian orders. However, after working collaboratively with our vendor partners, we have mutually agreed to take in all finished orders, have increased our Ethiopian 2020 order volume by double digits, and are current on all of our Ethiopian vendor payments.
“We have longstanding relationships with all of our Ethiopian vendor partners, we have substantially grown our business in Ethiopia every year, and we are committed to manufacturing in Ethiopia for the long term, with a specific focus on improving the working conditions and the wellbeing of Ethiopian garment workers. To that end, The Children’s Place, working with NGOs, has developed and implemented important programs.”
*Names have been changed to protect the identities of workers.