Shangdong Ruyi’s debt makes analysts cautious. The Chinese fashion group has launched an aggressive expansion campaign over the last 5 years. The group has acquired brands such as Bally, Sandro, Maje and Cerruti 1881 (among others). The problem, says the Financial Times, is that the campaign has had a cost that matched the aggressiveness of the expansion. Shangdong Ruyi’s debt has gone from 15 billion yuan (1.8 billion euro) at the end of 2015, to 28 billion yuan (about 3.6 billion euro) in 2018. Standard & Poor’s defined the group’s financial situation as “persistently inadequate”.
Analysts cautious to Shangdong Ruyi’s debt
The matter is anything but “virtual”. The value of a single share of Shangdong Ruyi at the Shenzen stock exchange has dropped by about 25% in the last 7 months. Moreover, the group has had difficulties keeping up with payments throughout the last year. The group had issued a 345 million USD bond that is expiring in December, and according to the FT, has hired consultants to explore other payment options.
The curse of the “Greandeur”
All considerations made, Shangdong Ruyi’s difficulties are somewhat similar to those of Tapestry. The challenges of the US-based group that owns Coach, Stuart Weitzman and Kate Spade is currently experiencing frustration regarding its ambitious plan to become the fashion conglomerate of the other side of the Atlantic. The ambitions of Shangdong Ruyi’ in origin a large textile manufacturer, to become China’s LVMH is being hurt by the poor performances of the acquired brands. Paying back debts is harder than expected.