Polish network LPP, the owner of Reserved, Cropp and Sinsay brands, did not actually leave the Russian market - research

LPP, a Polish clothing retail network with a turnover of $8.4 billion, which owns the brands Reserved, Cropp, House, Mohito and Sinsay and claims to be the largest fashion company in Central and Eastern Europe, has forged documents about its withdrawal from the Russian market.

Source. The American investment company Hindenburg Research LLC published an investigation that LPP did not actually leave the Russian market. After that, the Polish company's share price fell by almost a quarter.

Before the invasion of Ukraine, Russia was the largest market for LPP, generating 19.2% of revenue from 553 stores.

"LPP had plans to open hundreds more stores in Russia. It was the biggest market we wanted to develop," said a former company executive.

After the full-scale war began, LPP announced plans to distance itself from Russia and on 28 April 2022 announced the sale of its Russian unit.

The deal moved quickly: a few weeks later, the company announced the sale to an unnamed buyer.

However, despite the announcement of the loss of part of the business, LPP's total revenue still grew significantly – by 40.5% year-on-year, which is almost unheard of in the clothing retail industry.

"We believe that LPP was able to post these remarkable results because its divestment from the Russian business was a complete fraud," the investigation said.

LPP claims that it sold its Russian assets to a "Chinese consortium" in a deal worth $382 million. The buyer was a Dubai-based company called Far East Services, which was registered just one day before the sale was announced.

A former senior LPP employee said that the deal was "just a cover", adding that LPP's Russian operations were still "directly controlled by LPP headquarters and the board".

The former manager described the position of LPP CEO and founder Marek Piechocki: he "doesn't care about any war between Russia and Ukraine. This war is only temporary".

"In December 2023, we sent mystery shoppers to the flagship stores of Far East Services in Moscow and St Petersburg. Almost all of the clothes we photographed had identical designs and colours to the autumn/winter collections in LPP's online catalogues in Poland, indicating that LPP products are still penetrating Russia," the report says.

In addition, the Russian internal product codes were exactly the same as the product codes in the Polish LPP catalogue.

"It's a shock for me that it's LPP, because it is the owner of the largest Polish clothing brand. So it's hard to imagine that they could do something like that," said a manager at GS1 Global, the Polish branch of the barcode standardisation organisation.

The report says that if the Polish company's work in the Russian market is proven, it will mean a violation of the terms of loans and financial agreements with Poland's largest bank, PKO BP Bank, whose main shareholder is the Polish state. In accordance with its policy, the bank does not finance organisations operating in Russia and expects its clients to report the existence of trade relations with Russia.