The owner of Reserved, Sinsay, Cropp and Mohito stores simulated an exit from the Russian market, according to a report by the American research company Hindenburg Research. This caused the company’s shares to fall by 35%. The LPP called the report a disinformation attack.
Key points:
- Shares of one of the largest clothing retailers in Eastern Europe – Polish LPP – fell by 35% in Warsaw trading. The reason is the report of the “company killers” from Hindenburg Research.
- Despite LPP’s announcement that it would exit the Russian market in 2022, the company’s total revenue in the 2022-2023 fiscal year still increased by 40.5%, the investigation says. “We believe that LPP was able to post such excellent results because its denial of Russian business was a sham,” Hindenburg wrote.
- Until February 2022, Russia was the largest international market for LPP, accounting for about 19.2% of revenue from 553 stores.
- On April 28, 2022, LPP announced plans to liquidate its Russian division. Already in a few weeks, on May 19, 2022, the owners of Sinsay and Cropp announced the sale of the Russian business to the Chinese consortium Re Trading for $382 million. As it turned out, the buyer was the Dubai company Far East Services, which was registered only a day before reaching an agreement on the sale of the Russian subsidiary of LPP, and has no ties to China.
- In December 2023, Hindenburg sent mystery shoppers to Far East Services flagship stores in Moscow and St. Petersburg. Almost all the clothes were identical in design and color to the autumn/winter collections in the online catalogs of LPP in Poland.
For example, we found this woven jacket and skirt for sale in the RE store in St. Petersburg for about $60.60. It had the in-house product code 9105E-55X.
The same outfit can be found in Reserved’s Polish online store. The product code used by LPP is also 9105E-55X and matches the one from the dress available in Russia.
It was discounted at the US dollar equivalent of $24.80, from its normal price of $54.60, which is $6 cheaper than in Russia
The LPP company developed business in the Russian Federation before the war. The country generated 19.2% of revenue from 553 stores. In 2022, LPP announced that it would sell all Russian shares by June, but Polish goods continued to arrive in the Russian Federation. The company’s profit in 2023 increased by 13%.
Goods were delivered probably through Kazakhstan, Hindenburg said. LPP supplied its Kazakhstan subsidiary with about $755 million worth of goods in 2023, despite Kazakhstan accounting for only 1% of LPP’s brick-and-mortar stores.
“He didn’t give a damn about some war between Russia and Ukraine,” a Hindenburg source said of LPP founder Marek Pehotski’s attitude.
The LPP company called the report a disinformation attack. “It cannot be ruled out that such activity may be an attempt to gain influence over the company,” LPP said in a statement published in Polish media.
Background: $8 Billion Fast Fashion Retailer Based In Poland
The revenue of the Polish retailer LPP in Ukraine amounted to UAH 7.4 billion in 2023, according to Youcontrol data.
The company opened its first store in Ukraine in 2003. The company has already introduced all five of its brands to our market. Its portfolio included 144 Reserved, Cropp, House, Mohito and Sinsay stores as of December 2023, which together occupied 134,675 sq m. The largest number of shops in Sinsay is 55.
LPP Group is a leader not only among Polish retail companies in Ukraine, but also among other foreign brands in the fast fashion segment. It “holds” 10% of organized retail, Pro-Consulting calculated.
This is what is called “Trading in blood”
