Urban Outfitters has written to suppliers informing them that it can no longer accept delivery of goods on purchase orders, and will cancel all undelivered orders, in a bid to protect the business during the coronavirus outbreak.
The retailer also told creditors that any products with freight forwarders will be discounted by 30%.
In a letter sent to suppliers from Urban Outfitters European managing director Emma Wisden, seen by Drapers, the company said: “A material amount of our UK/EU countries are operating either under government forced requirement and/or restriction advice.
“Under these exceptional circumstances, we can no longer accept delivery of goods on retail POs [purchase orders - the official confirmation of an order]. We must regretfully invoke the force majeure provision of our contract and cancel all undelivered POs as of today. The same conditions are also impacting our direct business.
“Further, [on] any and all FOB [free on board] product that are as of today with freight forwarders, we will impose a 30% discount. We are aware that these decisions have significant financial implications for both our companies, but under the above duress we have little alternative.”
An Urban Outfitters spokeswoman told Drapers: “Unfortunately, like any business, we are doing our best to navigate these unprecedented circumstances. With our stores closed, we simply don’t have the capacity to accommodate all the stock on order. As such, our buying and merchandising teams have been in discussions directly with suppliers, negotiating on a case by case basis to reach an amicable end.”
What is force majeure?
Stephen Sidkin, partner at law firm Fox Williams, explains: “As the coronavirus news keeps on coming, it is inevitable that some fashion companies will seek to use the outbreak to justify failures to fulfil contractual obligations. This is likely to focus on what lawyers call “force majeure” or ”frustration”.
“Force majeure is usually taken to mean the occurrence of an event outside of the control of two parties that prevents one or both sides from fulfilling the contract.
“It is a provision often found in commercial contracts. ‘War’, ‘strike’, and ‘riot’ are often listed in a force majeure clause, and their meanings are quite clear.”