TV exposé puts Wesfarmers in the headlights

Tonight’s episode of Four Corners will feature a story titled Fashion Victims, which explores factory conditions within Bangladesh’s garment industry in the wake of the building collapse that killed more than 1,000 workers in April.

Bangladesh has increased its garment output by 400% in the past decade, with the industry expected to overtake China’s in the next few years to become the world’s largest garment producer. Importantly, the Four Corners episode tracks down factories making product for Coles and Target, companies which are owned by Wesfarmers (ASX: WES), amongst others.

With most Australian clothing retailers using overseas factories, the public focus on conditions under which overseas products are sourced will hopefully force companies to become more transparent in publishing safety compliance and condition audit results.

The increasing use of direct sourcing of home brand products by Wesfarmers and Woolworths (ASX: WOW) has meant these two firms have become more exposed to and responsible for conditions in overseas factories.  Premier Investments (ASX: PMV), Country Road (ASX: CTY) and Noni B (ASX: NBL) amongst many others also use overseas factories (although not necessarily in Bangladesh). It would not be surprising to see these firms also come out in coming weeks to reassure customers and state their policies and audit results publically.

Foolish takeaway

Issues such as these can be damaging to companies and brands if not handled honestly and with integrity. Investors will be watching closely to see that managers act in shareholders long-term interests to preserve their brands.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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