Mainland Headwear Holdings Ltd, the world's largest listed maker of caps, plans to nearly double the number of its franchised stores in China despite a media backlash after it was accused of labour abuses.
The company, which manufactures more than 30 million caps a year for Nike, Timberland, Warner Bros., McDonald's and other clients, runs two retail chains in China - headwear outlet Lids and Sanrio gift stores.
"The accusations were groundless and politically motivated," deputy chairman and managing director Pauline Ngan told Reuters on Wednesday, referring to accusations by Playfair 2008 - a combination of non-government organisations and trade organisations - that the firm underpaid workers.
Ngan said her piece-rate workers' average monthly pay of 1,100 yuan (US $144) was well above the minimum wage of 700 yuan in their district in China's southern boomtown of Shenzhen. Her hourly-paid supervisors earn an average 3,000 yuan a month.
She said the Playfair report and the subsequent media furore - which triggered a flood of calls from clients and Chinese regulators and delayed some orders - would not ultimately affect the company's growth prospects. "Our many clients have not found any problems with our factories, nor have the authorities, and the matter is resolved. But that report has brought a lot of trouble and it is frustrating," she said at her offices in northern Hong Kong.
Listed in Hong Kong in 2000, the firm saw a 27 percent leap in turnover in 2006 to HK$742.6 million (US $95.1 million). "The manufacturing business is getting tough though," Ngan said. "We won't take on any new major clients this year. But we've successfully branched out into retail."
Although manufacturing for global brands accounts for nearly half of the company's turnover - with trading and retail sharing the rest - squeezed margins and higher labour costs were making retail in the world's fourth largest economy an attractive growth prospect.
The company - which is manufacturing up to 8 million caps for the Beijing Olympics - plans to increase the number of franchised "Lids" stores to 30, up from 18 now, by the end of the year.
It also plans to raise the number of franchised "Sanrio" stores - which sell Hello Kitty products - to 60 from the current 38. That plan will add to an already operational 24 self-owned Lids stores and 46 self-owned Sanrio outlets. The Sanrio arm alone might see sales growth of up to 40 percent in 2007, Ngan said.
Mainland Headwear, founded by Ngan and her husband - both immigrants from the mainland - in the mid-1980s, has set aside HK$20 million in 2007 for a new factory in Shenzhen, adjacent to its existing plant, which the firm plans to open next year and help expand production capacity to 45 million hats by end-2008.
Comments
Comments are closed for this article.