Thousands Protest Bangladesh Factory Fire

A fire engulfed a garment factory in Bangladesh that manufactured garments for Li & Fung Ltd., 0494.HK +0.65% killing at least 120 workers and raising concerns about working conditions at plants that manufacture goods for the Hong Kong-based sourcing giant.

The incident deals another blow to Li & Fung, which is the buying agent for a variety of goods, including toys and clothes, for retailers such as Wal-Mart Stores Inc. WMT +1.90% and Target Corp. TGT +1.19% Li & Fung has been struggling to maintain earnings growth amid the growing trend of retailers buying more products directly from factories instead of sourcing them from middlemen.

Relatives of workers try to identify burned bodies outside the factory

A sluggish global economy and price competition are putting pressure on the world's middlemen. Wal-Mart Stores Inc. has canceled much of a deal in which Li & Fung Ltd. would supply goods for the U.S.-based retailer's overseas stores, people close to the companies said in September, as the U.S. retail giant moves to buy more of its products directly from factories.

Other Li & Fung clients, including baby-clothing maker Carter's Inc. and Gymboree Corp., also have said they plan to buy more products directly from factories. In the first half ended June 30, Li & Fung's core operating profit fell 22%, prompting analysts to cut their ratings on the company's stock.

Shares of Li & Fung have fallen 14% since the start of 2012, underperforming the boarder market's 19% gains as of Friday. As of Monday morning, the company's stock was flat at 12.40 Hong Kong dollars (US$1.60).

The fire swept through an eight-story garment factory near Bangladesh's capital, Dhaka, police and fire department officials said. The blaze broke out at the Tazreen Fashion building in the Ashulia industrial area, 15 miles north of Dhaka, on Saturday night.

Locals said panic-stricken garments workers jumped from windows as the fire spread and reported seeing charred bodies being brought out from the blackened building. Some workers said the building's fire escape route was blocked and that guards had failed to open the main gate after smoke engulfed the building.

The weekend incident was the latest in a series of deadly accidents at Bangladeshi clothing factories. Garments workers, who sew clothes for some of the biggest U.S. and European brands, have been demanding better pay and working conditions.

On Monday, thousands of Bangladeshi workers demanding justice were blocking the streets of a Dhaka suburb in a protest that has turned violent at times, the Associated Press reported. The workers threw stones at factories, smashed vehicles and blocked a major highway in the area, the AP said, and some 200 factories were closed for the day after the protest erupted in Savar, the industrial zone where Saturday's deadly fire occurred.

The factory hit by the fire is owned by Tazreen Fashion Ltd., a unit of the Tuba Group, which makes products for Wal-Mart and other companies in the U.S. and Europe. Tuba Group's branded buyers include Wal-Mart and Carrefour SA, CA.FR -0.26% according to a document on the company's website.

Officials at Tarzreen Fashion and its parent company Tuba Group couldn't immediately be reached for comments.

The cause of the blaze wasn't immediately clear and authorities have ordered an investigation, according to local media.

In a statement, Li & Fung confirmed that it had placed orders for garments with Tazreen Fashion in Bangladesh that were being manufactured at the premises where the fire occurred. The goods were sourced for Kids Headquarters, a unit of its U.S. division.

"We are very distressed and saddened by the deaths of workers and wish to express our deepest condolences to the families of the victims," a Li & Fung spokeswoman said, adding that the company is participating in aid efforts for immediate relief and is matching the Bangladesh Garment Manufacturers and Exporters Association's financial assistance by pledging 100,000 Bangladeshi takas (US$1,200) to each victim's family.

"We are in contact with the owner of the factory and we will be carrying out our own investigation into the circumstances which led to the fire," it said.