British upscale brand Debenhams leaves its Bangladesh apparel suppliers high and dry
Garment exporters who supplied to the struggling British department store Debenhams have come across a brick wall.
The brand, which used to purchase more than $120 million worth of mainly high-end garment items from 40 manufacturers in Bangladesh in a year, has demanded a mindboggling discount from its suppliers here.
It has sought a 90 % discount, meaning it will just pay $1 if the price tag on a woven shirt was fixed at $10 when the goods were shipped.
"That is absurd," Zahangir Alam, the coordinator of Debenhams Vendors Community in Bangladesh, told The Daily Star over the phone yesterday.
Currently, Debenhams, which includes appointed an administrator last month, its second in the past year, owes a staggering $66 million to its vendors in Bangladesh.
Of the total amount, garment items worth $26 million is lying in the UK ports and another $40 million is in the factory floors prepared to be shipped.
"We are uncertain about getting payment from Debenhams as the business has appointed administrators," said Alam, also the managing director of Design Source.
The indebted retailer had problems before the health crisis and on April 9 confirmed the appointment of restructuring firm FRP Advisory to handle a "light touch" administration of the 142-store chain.
The administrators works alongside existing management to "get the business enterprise into a position to re-open and trade as much stores as possible again when restrictions are lifted".
However, in addition, it warned that FRP Advisory will be putting its Irish chain into liquidation, which would mean the long lasting closure of 11 stores that employ around 1,260 people.
Initially, Debenhams sought 60 days moratorium from Bangladeshi suppliers to pay $70 million up to March, but later it sought another thirty days.
"We will hold a virtual meeting tomorrow with the administrators and the sourcing head of Debenhams to demand our payment," Alam said.
Demanding a 90 per cent discount from the suppliers is abnormal. Many small and medium scale factories will never be in a position to sustain such a large blow to their business.
Alam is preparing to help Debenhams in order that the company could make a turnaround.
"But we can at most handle 15 % discount," he said.
Moreover, if the united kingdom court declares Debenhams as bankrupt, it will take at least five years to get hardly any money, by which the local suppliers will crash and burn.
Alam went on to urge the governments of the two countries to interact to find an amicable solution to the problem.
"Otherwise we will be in more trouble in this critical time," he added.
Meanwhile, Debenhams has already laid off all 69 employees in its Dhaka office on April 15, said among the terminated employees requesting anonymity.
The British chain had opened the liaison office in Dhaka in 2013.
The termination of the employees is against the law because the move will not follow the agreements that were signed with the Bangladesh Investment Development Authority.
"We are communicating with the Debenhams headquarters to obtain our dues."
Asked about the pending payments, he said: "Since we are no more official employees of Debenhams, we cannot say anything about the payments to the manufacturers and vendors."
The Daily Star contacted the British company but got no response during filing the report.
