Polish fashion retailer, LPP SA has put the readymade garment (RMG) in a troublesome situation as the brand stopped taking delivery of $400 million worth of RMG. According to the country’s leading apparel trade body – Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) –more than a hundred RMG factory owners are in a grim situation.
Commenting on the matter, BGMEA President Faruque Hassan said to media, “I just met with LPP SA local representatives and asked them to take delivery of the goods and clear payment as soon as possible.”
“LPP claimed that the Russia-Ukraine war is putting them under grave financial pressure, and this is why they are deferring shipments despite placing new orders. LPP assured me that they will take delivery of the goods as soon as possible.”
He added, “I also spoke with the central bank governor, urging him to take necessary steps so that LPP related LCs do not turn into forced loans. The governor assured us that they will take the matter into consideration.”
Shahidullah Azim, Vice President, BGMEA said to media that LPP SA – which has the brands Mohito, Reserved, House, Cropp and Sinsay in its portfolio – had stopped taking delivery of $400 million worth work orders which stuck in warehouses earlier this year.
“BGMEA has pursued info from its member businesses about the real value of the apparel goods that are at present stuck in warehouses, and 18 companies have submitted their data till date, informing that products worth $60 million are presently stuck,” added Shahidullah Azim.
Industry people say after LPP SA stopped taking most supplies after the Russia-Ukraine conflict ensued and Bangladeshi RMG exporters started having woe with opening back-to-back letters of credit (LCs), obligatory loans, and liquidity crunch, making it tough to pay RMG workers’ wages.
Industry leaders opined that the government must put force on LPP SA, and offer services to exporters on a case-by-case basis so that entrepreneurs’ back-to-back LCs do not turn into forced loans. Else they will be in grave suffering.
Besides RMG exporters, raw material suppliers are also in big trouble as the Polish retailer as the company did not clear the dues of apparel makers. Under the situation, RMG exporters sent letters to suppliers looking for time extensions in a bid to tackle the condition. They are pursuing government policy support to overcome the scenario.
According to industry insiders – annually, LPP SA procures apparel goods worth $1 billion from Bangladesh. And according to LPP data, the company sold around $14 billion of garments globally in 2021. $7.8 billion in 2020 and $9.9 billion in 2019.
The Russia-Ukraine conflict put a heavy toll on the retailer – as LPP SA shut down around 750 stores in Poland and Russia. Leaving it with a big volume of additional garment stock. Industry people say this phenomenon of differing ready-to-ship orders is not new for the retailer – as the pandemic time it canceled a big volume of work orders.
LPP SA’s apparel suppliers said that their suffering has reached a grave situation – as banks have now issued a forced loan against my back-to-back LC. On top of it, they cannot pay the workers.
Fazlee Shamim Ehsan, Vice-President, BKMEA said to media, “Smaller factory owners are suffering the most because of the brand’s refusal to take delivery of goods.
“They are not rousing up trouble because they do not have many alternatives. But they cannot tackle this catastrophe alone as they have very limited working capital.”