Major US retailer seeks refund from local suppliers
In an unprecedented move, a major US retailer, American Eagle Outfitters, demanded a 2 percent rebate on a portion of its shipments from Bangladesh last year to help the company deal with falling sales.
“We have always believed partnership to be a two-way street, and we are stronger by supporting each other in times of challenge,” the troubled company said in its letter to all suppliers on December 24, 2014.
With that in mind, the company has decided to ask every supplier to extend it a volume rebate for 2014 through a 2 percent rebate on holiday products. Rebate is a deduction from an amount to be paid or a return of an amount given in payment. This is the first time that a retailer has asked for this kind of help to support its financial needs.
Headquartered in Pennsylvania, AEO targets 15- to 25-year-old customers mainly with its low-rise jeans and graphic T-shirts.
A listed company on the New York Stock Exchange, AEO reported total net revenue of $854 million for the quarter that ended on November 1, 2014, down slightly from $857 million last year.
Sales during the quarter have been off year-on-year but its operating profit margin improved, the letter said.
“This also represents materially better results than our historical competitive set. Nonetheless, the competition in the market remains fierce. While we are confident that we are on the right path, we do need your support.”
AEO sources nearly $600 million worth of garment items from around 30 garment factories in Bangladesh, according to Atiqul Islam, president of Bangladesh Garment Manufacturers and Exporters Association.
One of the suppliers in Bangladesh said the demand for rebate on shipments is unjust. “Sometimes our profits fall too but we do not go around demanding a rebate,” he said, asking not to be named given the sensitivity of the issue.
“We, garment makers, are going through a tough time too. Honouring their demand for a rebate during such a period will only push our business over the edge.”
The Bangladeshi garment manufacturers remain silent when the retailers enforce a price cut despite the constant rise in production costs, the BGMEA president said.
“So, AEO's demand is rather unusual,” he said, adding that retailers on occasions ask for discounts or order cancellations.
The garment makers' platform has not received any such letter from AEO though, so the issue has to be resolved by the company and the suppliers themselves, Islam added.
AEO will be sending a rebate agreement form shortly, according to the letter. The Daily Star obtained a copy of the letter from one of AEO's suppliers.
AEO operates more than 1,000 stores in the United States, Canada, Mexico, China, Hong Kong and the United Kingdom, and ships to 81 countries worldwide through its websites.
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