By Joanne Chiu
HONG KONG--A fire engulfed a garment factory in Bangladesh that
manufactured garments for Li & Fung Ltd. (0494.HK), killing at
least 120 workers and raising concerns about working conditions at
plants that manufacture goods for the Hong Kong-based sourcing
giant.
The incident deals another blow to Li & Fung, which is the
buying agent for a variety of goods, including toys and clothes,
for retailers such as Wal-Mart Stores Inc. (WNT) and Target Corp.
(TGT). Li & Fung has been struggling to maintain earnings
growth amid the growing trend for retailers to buy more of its
products directly from factories instead of sourcing their products
from middlemen.
A sluggish global economy and price competition are putting
pressure on the world's middlemen. Wal-Mart Stores Inc. has
canceled much of a deal in which Hong Kong's Li & Fung Ltd.
would supply goods for the U.S.-based retailer's overseas stores,
people close to the companies said in September, as Wal-Mart moves
to buy more of its products directly from factories.
Other Li & Fung clients, including baby-clothes maker
Carter's Inc. (CRI) and Gymboree Corp., also have said they plan to
buy more products directly from factories. In the first half ended
June 30, Li & Fung's core operating profit fell 22%, prompting
analysts to cut their ratings on the company's stock.
Shares of Li & Fung fell 14% since the start of 2012,
underperforming the boarder market's 19% gains as of Friday. At
0349 GMT, the company's stock was flat at 12.40 Hong Kong dollars
(US$1.60).
The fire swept through an eight-story garment factory near
Bangladesh's capital, Dhaka, police and fire department officials
said. The blaze broke out at the Tazreen Fashion building in the
Ashulia industrial area, 15 miles north of Dhaka, on Saturday
night.
Locals said panic-stricken garments workers jumped from windows
as the fire spread and reported seeing charred bodies being brought
out from the blackened building. Some workers claimed the
building's fire escape route was blocked and guards had failed to
open the main gate after smoke engulfed the building.
This is the latest in a series of deadly accidents at
Bangladeshi clothing factories in recent years. Garments workers,
who sew clothes for some of the biggest U.S. and European brands,
have been demanding better pay and working conditions.
The factory is owned by Tazreen Fashion Ltd., a unit of the Tuba
Group, which makes products for Wal-Mart and other companies in the
U.S. and Europe. Tuba Group's branded buyers include Wal-Mart and
Carrefour SA (CA.FR), according to a document on the company's
website.
Officials at Tarzreen Fashion and its parent company Tuba Group
couldn't immediately be reached for comments.
The cause of the blaze wasn't immediately clear and authorities
have ordered an investigation, according to local media.
In a statement, Li & Fung confirmed that it had placed
orders for garments with Tazreen Fashion in Bangladesh that were
being manufactured at the premises where the fire occurred. The
goods were sourced for Kids Headquarters, a unit of its U.S.
division.
"We are very distressed and saddened by the deaths of workers
and wish to express our deepest condolences to the families of the
victims," a Li & Fung spokeswoman said, adding that the company
is participating in aid efforts for immediate relief and is
matching the Bangladesh Garment Manufacturers and Exporters
Association's financial assistance by pledging 100,000 Bangladeshi
Takas (US$1,200) to each victim's family.
"We are in contact with the owner of the factory and we will be
carrying out our own investigation into the circumstances which led
to the fire," it said.
Write to Joanne Chiu at joanne.chiu@wsj.com
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