Home ›› 17 Oct 2022 ›› Front
LPP SA, a Polish multinational clothing retailer, has stopped taking delivery of most ready-to-ship readymade garment (RMG) goods since April this year, putting more than a hundred Bangladeshi exporters in a serious bind.
The retailer – which has the brands Mohito, Reserved, House, Cropp and Sinsay in its portfolio – had placed work orders worth at least $400 million earlier this year, said Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Vice President Shahidullah Azim.
He added that the association has sought information from its member companies about the actual value of the goods that are currently stuck in warehouses, and 18 companies have submitted their data till date, informing that goods worth $60 million are currently stuck.
Industry insiders say after the company stopped taking most deliveries following Russia’s invasion of Ukraine, Bangladeshi exporters began having trouble with opening back to back letters of credit (LCs), forced loans, and liquidity crunch, making it difficult to pay wages.
Alongside exporters, LPP has also put the local suppliers – who supplied the raw materials to manufacturers – in jeopardy. Under the circumstances, exporters are seeking government policy support to navigate the troubled waters.
Rupa Group – a leading RMG manufacturer – produced around 2.35 lakh pieces of sweater and t-shirt for LPP SA, which is worth around $1 million. Shipment date of the goods was April, May and July, but the group is yet to ship a single piece of clothing item.
Recently, the buyer set November and July for shipping of the goods.
Rupa Group’s Managing Director Md Shahidul Islam said, “The buyer is not taking delivery of the goods citing excuses, but how I will pay the workers? The bank has already issued a forced loan against my back to back LC. I do not know what to do with the ready-to-ship goods.
“The government must put pressure on LPP SA, and provide facilities to exporters on a case-by-case basis so that our back to back LCs do not turn into forced loans. Otherwise we will be in serious trouble.”
IFS Texwear, another RMG manufacturing company, manufactured around 35 lakh pieces of knitwear items for LPP SA, worth around $6.6 million. The scheduled shipment date was four months ago, but the buyers did not take delivery of the goods.
IFS Texwear Managing Director Salah Uddin Ahmed Shamim said, “I paid workers wages by taking out loans. All my LCs are now turning into forced loans, and I sent letters to my suppliers seeking time extension in a bid to tackle the situation.
I do not know how many days my suppliers will wait.”
He continued, “LPP had recently informed me that they will take delivery of the goods, but it will take more time because they are facing a financial crisis. This buyer has placed new orders with our company, but the delivery of previous orders is still pending.”
The Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Vice-President Fazlee Shamim Ehsan said, “Owners of smaller factories are suffering the most because of LLP’s refusal to take delivery of goods.
“They are not stirring up trouble because they do not have many buyers. But they cannot tackle this crisis alone as they have very limited working capital.”
More than a hundred factories in trouble
According to the BKMEA and BGMEA – apex bodies of the apparel industry – LPP has put more than a hundred RMG factory owners in a difficult situation.
Commenting on the matter, BGMEA President Faruque Hassan said, “I recently 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 serious 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 then 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.”
Industry insiders claimed that LPP SA purchases RMG goods worth around $1 billion from Bangladesh annually. This brand is very popular in Russia and Ukraine.
In 2021, the company sold around $14 billion of clothes globally, which was $7.8 billion in 2020 and $9.9 billion in 2019, according to LPP data.
When the Russia-Ukraine war began in February this year, the brand closed around 750 outlets in those countries, and this is why the company has a big volume of clothes in stock, industry insiders say. The company also postponed a large amount of work orders during the Covid-19 crisis, but later began taking deliveries of orders when the pandemic restrictions eased globally.
Fabrica Knit Managing Director Mijanur Rahman is one of the largest traders in Bangladesh for LPP SA, and he exports apparel goods worth around $60 million annually.
He claimed that LPP is incurring severe losses due to the Russia-Ukraine war, just when it was recovering from the pandemic losses. “Despite LPP’s losses, the retailer must figure out a way to receive the ready-to-ship goods from Bangladesh and clear payments,” Mijanur said.
