Shandong Ruyi, the Chinese conglomerate known for its ownership of several prominent European fashion brands, has struggled in the first half of 2021. The company experienced a significant decrease in turnover, with a 20.43% drop compared to the previous year. The clothing category, in particular, saw a staggering decline of 44.67% in revenue share, dropping from 76.57% to 53.24%. One of its brands, Kent & Curwen, faced even more significant challenges, with total revenues reaching CNY261 million (€34.1 million) and a net loss that widened by 393%, amounting to CNY44.75 million (€5.85 million).

Although Shandong Ruyi is involved in various sectors such as textiles and raw materials, it has a diverse portfolio of fashion businesses. Some of the notable brands under its ownership include SMCP, Gieves & Hawkes, Kent & Curwen, Cerruti 1881, and Lycra. However, the most substantial decline was observed in the clothing category, which experienced a nearly 45% decrease. This decline raises concerns for Shandong Ruyi, as clothing represents its largest division. Furthermore, the gross margin within this category also fell by 12%.

The company had aimed to become China’s equivalent of luxury conglomerate LVMH. However, it has faced numerous challenges in achieving this goal. Shandong Ruyi operates with a significant debt burden and has encountered increased regulatory scrutiny within China. In late 2020, the company defaulted on two CNY1 billion bonds. This default was partly caused by the additional debt taken on during a series of acquisitions over the past few years, which ultimately led to the ownership of its current brand portfolio.

Given its struggles in the first half of the year, Shandong Ruyi needs to make strategic adjustments and establish financial stability. Addressing its heavy debt load and navigating the regulatory landscape will be crucial for the company to regain momentum and work towards its long-term goals. Additionally, tackling the decline in clothing sales, which is its largest division, is essential for overall success. As the fashion industry continues to face challenges due to the ongoing global pandemic, Shandong Ruyi’s ability to adapt and overcome these obstacles will determine its future performance.

Useful links:
1. China signaling red controls as Chinese companies seek global purchase
2. The Ruyi Name Game: Shandong Ruyi puts Gieves & Hawkes up for sale