By Gary Cassady, The Motley Fool
The clothing industry has seen a number of human rights violations in recent history, especially related to underpaying workers in the developing world. If you have high ethical standards, in line with the social platform of superstar Angelina Jolie, which clothing brands should you buy? Below is a list of more ethical apparel brands.
To find some ethical companies, Benzinga looked to the Ethisphere Institute, a society which publishes a list of 110 most ethical companies in the world for the year 2011. The main categories for the institute’s list were corporate citizenship and responsibility, ethics and compliance program, corporate governance and reputation, leadership and innovation. A number of clothing producers and sellers made it on this list.
Among the companies that made this list include Germany’s Adidas (ADSYY), a company that manages brands like Reebok and Rockport. Last year was a good year for Adidas, with total revenue up 9% compared to the previous year. Retail sales grew by 18%, driven by strong showing of Adidas’ main brands, Adidas and Reebok. In late March, Adidas presented its new environmental strategy with a goal of using 100% Better Cotton by 2018 in an attempt to reduce its environmental footprint.
The markets seemed to reward Adidas’ approach, since its shares gained over 9% over the last 30 days. Its shares did tumble 1.5% in the immediate morning trading following the report, however.
Next on the list is Gap (GPS). This San Francisco-based company has five primary brands: Gap, Banana Republic, Old Navy, Athleta, and Piperlime. Although the company’s Q4 net income results for prior year grew to $365 million from $303 million in the previous quarter, the more recent news has not been kind to Gap. Its March, sales were down 8% compared to last year’s numbers. To make matters worse for Gap, a number of agencies have downgraded its shares. The last one was Goldman Sachs slapping a sell rating on its shares yesterday. The Gap lost 3% that day. Today was no better, as Gap’s losses continued in the morning session, and its shares lost another 3% of their value. Over the last three months, Gap shares still gained over 7%.
The Timberland Company (TBL) , another American clothing producer, also made its way onto the list. Last year the Timberland Company achieved the industry’s largest greenhouse emissions reduction of 38%, though still below the company’s 50% target. The greenhouse emission reduction did not seem to hurt Timberland’s profits as its reported Q4 earnings per share of $0.82 — way above Thompson Reuters’ prediction of $0.51 EPS.
Timberland’s shares are one of the major success stories this year after rising almost 60% in the last three months, even though they lost over 1% in today’s trading, completing a bad morning for retailers.
H M, a Swedish clothing store, is another household name on the list. The end of last year was far from memorable for the Swedish giant as its profits tumbled by 11%, more than the analysts were predicting. Not too encouraging for investors were its March sales figures; they were up by 2% as a result of market expansion, but same-store sales were down by 5%.
Bad sales and profit results took their toll on H M’s shares, which lost around 7% of their value in the last three months. Today’s results are more encouraging for the Swedish giant as its shares at Stockholm’s stock exchange were up 0.75%.
The last company on Benzinga’s list is Target (TGT) . Although you’ll not likely to find Angelina Jolie shopping at Target, the Minnesota-based retail giant has been named by DiversityBusiness.com as one of the top 50 organizations for multicultural business opportunities. This has not helped Target’s sales much, as it recently reported a year-to-date sales drop of 2.4%. Target remains optimistic, though, as it hopes sales will pick up during Easter, which comes much later this year.
This has been a difficult year so far for Target. Shares have lost almost 8% in the past three months. In morning trading, Target avoided the fate of the Gap, Adidas, and the Timberland Company and saw its shares rise by a mere 0.06%.
The modern consumers seem to care more and more about issues of business ethics and environmental stability, and many mainstream companies are increasingly addressing the modern ethical buyer. The companies on the World’s Most Ethical Companies list are outperforming the SP 500 since 2007, and the gap has widened in recent years, which indicates that the credo of the Ethisphere Institute — “Good. Smart. Business. Profit.” — might be worth pursuing.
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