Suppliers to New Look have hit out at the young fashion chain after it informed them it was delaying payments “indefinitely” amid the COVID-19 crisis.
According to the BBC, the retailer, which had been trading under a CVA before the crisis hit, had told suppliers that it was suspending payments to suppliers for existing stock and they were offered the opportunity to collect it.
In addition all forward orders had been cancelled with no offers of payment for any work completed or in progress.
New Look had written to suppliers saying the extraordinary measures were “a matter of survival”.
One supplier told the BBC that the retailer was passing all the risk from the crisis to its suppliers who could themselves be imperilled as a result.
“The new reality in China is that factories now insist on deposits for all orders placed on behalf of grocers and large retailers, as they cannot afford orders to be cancelled with no compensation to cover raw materials and production,” it said.
In a letter to its suppliers New Look CEO urged its factories to seek out government support in their countries designed to help them through the crisis.
In a statement to the BBC, the retailer said: “Whilst our online sales channels remain open, albeit on a significantly reduced basis, we have regrettably had to inform suppliers that we cannot place new orders until further notice and will be temporarily postponing outstanding supplier payments until the situation improves.”
“We have not taken this decision lightly and have only done so out of absolute necessity, given the exceptional circumstances we are in. We greatly value our relationships with suppliers and are actively identifying opportunities where they can hold product for use for autumn-winter this year or spring-summer next year.”
New Look is far from alone in cancelling forward orders and delaying payments but its actions have been more extreme than some other retailers, which is due to the fact that the retailer had been struggling before the crisis hit.
Yesterday global giant H&M said that while it had cancelled all forward orders, it would accept delivery of all completed orders and all work in progress would be paid for in full. Meanwhile Primark has today announced a fund to ensure workers at factories where it has cancelled forward orders will receive their wages.