The stock price of LPP, the Polish fashion retailer that is one of the biggest companies listed in Warsaw, recouped some of the losses on March 18 after a report by the US business intelligence company Hindenburg Research accused it of faking an exit from Russia after the Kremlin's invasion of Ukraine.

LPP’s stocks rose 20.5% to PLN13,800 (€3,193) as trading closed on the Warsaw Stock Exchange on March 18, making up part of the previous trading day’s collapse of nearly 36% to PLN11,450.

The company fiercely denied claims by Hindenburg Research that it had faked an exit from Russia following the outbreak of the war in Ukraine. The report alleged that LPP continues to sell in Russia, routing products through Kazakhstan.

Hindenburg Research is a financial investigations company and a short seller. As it published the damning report on LPP, it also said that it took a short position on the company’s stocks. 

“LPP does not conduct operational or commercial activities in Russia as of May 2022, and Kazakhstan is not a transit market. The company did not ship goods to Russia through the territory of that country,” LPP’s CEO Marek Piechocki told a press conference on March 18.

"LPP will not return to Russia. The Russian business was sold in 2022 to an unrelated investor. LPP does not have the option to repurchase the business, there is no call option," Piechocki also said.

The company admitted it is supplying goods to the new owner of its Russian business under the terms of a deal obliging LPP to “deliver goods to the investor's purchasing agents … which are in no way connected to LPP and operate completely independently”.

"The share of sales made to purchasing agents is small – at [a planned] 3% in 2024 – and significantly decreases year by year. The goods are transferred at cost, and LPP currently does not profit from this in any way. This is part of the so-called transitional period, not the company's commercial activities," the company said.

LPP also said it filed a motion with a Polish prosecutor’s office about possible criminal activity against the company and Poland’s financial market.

LPP’s claims directly contradict the report by Hindenburg Research.

The report, titled “Operating behind enemy lines: how fashion powerhouse LPP masked a fake Russia ‘sell-off’ using front entities and encrypted barcodes”, claims that LPP’s excellent financial results after it had announced it was exiting Russia prove that the exit was a “complete sham”.

Selling LPP’s Russian business to a Chinese entity was “a façade to hide [the] truth of not selling the Russian operations”, a “senior LPP employee” told Hindenburg Research.

“LPP’s Russian operations are still ‘directly controlled by LPP HQ and board’,” the report also quoted the employee.

LPP’s net profit jumped 163.4% y/y to PLN484.4mn in the fourth quarter, the company also said on March 18. The result was slightly below the consensus line of PLN485.7mn.

LPP sells fashion under the brands Cropp, Sinsay, House, Mohito, and Reserved

 

 

 

 

 

 

 

 

 

 

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