Victoria's Dirty Secret - Coherus BioSciences (NASDAQ:CHRS)

It would seem that the Fair Trade laws that were supposed to help eliminate child exploitation and unfair working conditions are “perversely providing incentives for the exploitation of children”, according to Bloomberg. The

feature, which highlights the plight of a 13-year-old called Clarisse Kambire

, says that a program in Burkina Faso, one of the poorest countries in Africa, has “attracted subsistence farmers who say they can't grow ‘ethically sourced' cotton without forcing children into their fields.” It is not a story that

Victoria's Secret

, a brand owned by

Limited Brands

LTD

, will be happy to have splashed across the media, after it spent so long blowing the “fair trade” trumpet. It is entirely possible that LTD did not even know that these things were happening. In this case, however, ignorance is no excuse. If a company is going to play the fair trade card, it had better be as sure as it can possibly be that it's trade is fair. The article states that, “By the time Clarisse picked her first harvest in 2010, Victoria's Secret was becoming the fair trade program's only buyer instead of the most prominent, according to Georges Guebre , the program's leader.” Further, “An executive for Victoria's Secret's parent company says the amount of cotton it buys from Burkina Faso is minimal, but it takes the child-labor allegations seriously. ‘They describe behavior contrary to our company's values and the code of labor and sourcing standards we require all of our suppliers to meet,' says Tammy Roberts Myers, vice president of external communications for Limited Brands Inc., which owns Victoria's Secret. ‘We are vigorously engaging with stakeholders to fully investigate this matter.'” Clarisse's story is heart-breaking, and one hopes that Victoria's Secret and LTD will try to do something about it. The story also makes us wonder which other companies might unknowingly be aiding child labor while singing a fair trade tune. Whether the revelation will have an affect on LTD's performance remains to be seen. The company has some serious damage control to do, and fast. Still, with a current market cap of $11.3 billion, it leagues ahead of its nearest competitor. Still, traders who want to steer clear of this controversy might want to take a look at Charming Shoppes

CHRS

which just saw a positive change of 5.39 percent, taking its market cap to $569.85 million. If you would like to be alerted to LTD and Victoria's Secret updates as they come out in real-time, signup for a

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ACTION ITEMS:

Bullish:
Traders who believe that Victoria's Secret will recover might want to consider the following trades:

Limited Brands also has La Senza and Bath & Body Works in its armory, among others. These are strong brands that probably will not take much of a hit from the Victoria's Secret association.

The Victoria's Secret people are claiming and that might be enough. They are probably telling the truth too. If they make the right noises now, this might well blow over for them.

Bearish:
Traders who believe that the faux pas is too great and basically unforgivable may consider alternative positions:

As well as Charming Shoppes, take a look at The Talbots TLB. The direct marketer of women's apparel has seen a positive period with a current change of 2.97 percet and a market cap of 195.31 million.

Specialty retailer Chico's FAS CHS is another company worth a good look. The current market cap is 1.77 billion, and it has seen a 2.72 percent change of late.

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