Garment firm expects revenue drop as partner's parent goes bankrupt
Risk provision may write some revenue off the record for Song Hong Garment JSC as the company prepares for the likely bankruptcy of its US partner’s parent firm.
Hanoi (VNS/VNA) - Risk provision maywrite some revenue off the record for Song Hong Garment JSC as the companyprepares for the likely bankruptcy of its US partner’s parent firm.
US-based retailer RTW Retailwinds, owner of400 New York & Co stores in 32 states across the US, filed for bankruptcyon July 13 and it will likely close all of its stores.
RTW Retailwinds reported revenue in 2019dropped 7 percent year-on-year to 827 million USD and recorded a net loss of 61.6million USD. In 2018, it reported a profit of 4.2 million USD.
When the COVID-19 pandemic halted alleconomies, the company had to temporarily close stores and furlough workers.
RTW Retailwinds’ New York & Co iscurrently the largest partner of Song Hong Garment.
After RTW Retailwinds announced the plan toclose all stores, shareholders and investors at Song Hong Garment voicedconcerns about the Vietnamese firm’s earnings prospects this year.
According to sources, all liabilities in 2019RTW Retailwinds owed to Song Hong Garment are already settled.
The liabilities so far in 2020 are worth 220billion VND (9.5 million USD) and if RTW Retailwinds’ bankruptcy proposal isapproved, Song Hong Garment will lose that income.
In the first-quarter financial report, SongHong Garment said liabilities owed by New York & Co were worth 166 billionVND.
“The company is working to join thebankruptcy proceedings to claim its liabilities owed by New York & Co,” SongHong Garment said in a filing to the Ho Chi Minh Stock Exchange on July 17.
“Further information and the officialdecision of the US court regarding the case will be updated,” the company said.
According to Song Hong Garment JSC, thecompany's operation will not be affected by the bankruptcy, but in the shortterm, earnings will be dampened as revenue from RTW Retailwinds often accountsfor a large proportion of its total.
“Revenue from New York & Co accounted for13 percent of Song Hong Garment’s total revenue in 2019,” the company said inthe filing.
The local garment firm expects totalrevenue in 2020 would drop 27 percent year-on-year to 3.2 trillion VND andpre-tax profit would dive 54 percent year-on-year to 250 billion VND.
The local garment firm’s shares (HoSE: MSH)plunged total 10.7 percent in the last two trading days to end July 17 at 30,450VND (1.31 USD) apiece./.
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