Lycra is stretchy. The balance sheet of the Shandong Ruyi group, which splurged more than $2bn for a majority stake in the brand, is proving less elastic. The so-called “LVMH of China” spent a total of $5.8bn buying businesses such as Bally of Switzerland, Britain’s Gieves & Hawkes and France’s Sandro, Maje & Claudie Pierlot. That conferred temporary glamour on a business rooted in textile manufacturing. Now it is running out of cash.
Instead of becoming a global fashion powerhouse, privately held Shandong Ruyi is struggling under a heavy debt load. It is struggling not just to pay for its purchases, but also to cover its most basic expenses.
Big groups such as Cargill and Louis Dreyfus will halt most cotton supplies to Shandong Ruyi, which has been put on an industry blacklist. The group is getting the cold shoulder for failing to pay compensation to a Bangladeshi partner as ordered in an arbitration case ruling. Production disruption could hurt its textile operations, as well as its global brands portfolio, which are big purchasers of cotton.