‘Gun-Shy’ Investors Forced Outland to Close Cambodian Factory
After two years of supporting its workers through Covid, certified B Corp Outland Denim was forced to fold one of its two Cambodian factories in December.
Founding CEO James Bartle explained the decision in a letter posted to the label’s website Thursday, writing that the decision to continue paying factory employees through shutdowns came at “an immense cost” to the company. Coupled with weak revenue and hesitant investors, Outland Denim saw only two paths forward: close the whole business or pare back operations.
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“As part of our ‘rescue mission,’ we decided to do the latter, which included letting go of some of our much loved head office staff, relocating our HQ, cutting back on staff hours and wages as a stop-gap solution, and eventually folding our factory operations into one facility in [Cambodia’s capital] Phnom Penh,” Bartle wrote.
When Covid first arrived in 2020, Outland Denim had just launched its brand in North America through a distribution agreement and the support of retailers like Nordstrom. “Almost overnight, our wholesale business collapsed,” Bartle said. When lockdown restrictions forced it to close its two factories, however, it continued to pay staff for unworked hours spent at home.
While Outland Denim maintained its workforce, two factories and operations in Australia, revenues declined. The label turned to debt finance and loans from friends and family, Bartle said. Actions taken by the Australian and Cambodian governments provided “small boost[s],” he added. Outland sought investment from the venture capital community as well but found impact investors “gun-shy.”
“As we all know, the world did not return to ‘normal’ in 2022, and 2023 wasn’t shaping up to be different,” Bartle said. “Things would get worse before they would get better. And after two years of supporting our workers through Covid, and our best efforts to compensate for lost revenue by ramping up our manufacturing services for other brands and diversify our revenue streams, we simply couldn’t do it anymore.”
And so, roughly a decade after the foundations for Outland Denim in Cambodia, the company was forced to close its first factory in the province of Kampong Cham, Cambodia. According to Bartle, Outland offered the staff a financial management course, as well as the opportunity to transition to its Phnom Penh facility. Eight chose to do so, while 40 did not. Those who opted not to continue with Outland received full severance, Bartle added. The company intends to monitor its former employees’ wellbeing and offer assistance “when and where [it] can,” he said.
“Our mandate as a social impact brand also comes with added responsibilities: while most brands can turn a blind eye to the factory staff impacted by cancelled orders or an economic downturn, we know our factory staff by name, and we know their stories,” Bartle wrote. “We also know that unemployment is a key risk factor in vulnerability to modern slavery. That individual debt drives people to desperation, migration and exploitation. And we know that developing countries have very limited social security systems (if any) to support the unemployed.”
Outland Denim is not the only mission-driven brand that has been forced to make tough decisions because of the pandemic. Kitsbow, a small North Carolina-based benefit corporation—it was on the road to official B Corp certification—was forced to close shop last month. CEO David Billstrom, who helped lead the brand’s switch to American manufacturing and employee ownership, explained the decision in a March letter to Kitsbow’s customers. In it, he attributed the company’s current situation in part to a lack of operating capital and an unfriendly investment environment.
