The bitterness of standing on the shoulders of giants

In a short period of time, Gilimex became a company with dizzying revenue growth, but after only one time being "bombed" by Amazon, Gilimex fell into a difficult situation. Gilimex's story is just a representative of many businesses that have rushed to put their trust in the wrong place at a price that is also quite expensive and takes many years to recover.

Lawsuit worth $280 million 

The Vietnamese company filed a lawsuit against Amazon, asking for $280 million in compensation. Gilimex accused Amazon of suddenly shrinking orders, causing the manufacturer to suffer from excess production capacity and raw materials.

The lawsuit was approved by an international court because there is evidence that production for Amazon has increased 20-fold over the course of 8 years. The e-commerce giant shrunk its business so suddenly that Gilimex couldn't keep up.

Amazon's annual report notes that its total warehouse area has increased from 25 million square meters at the end of 2019 to nearly 49 million square meters by the end of 2021, doubling in two years. With the expansion rate too "hot", when returning to the new normal, the demand for online shopping cooled down, and Amazon had to slow down its expansion plan.

Gilimex said that in April and May 2022, Amazon "immediately shifted and reduced expected demand" for the remainder of 2022 and 2023 to a fraction of previous projections. Because sales to Amazon account for a large proportion, when this company suddenly reduces demand, the results are reflected in Gilimex's business in the third quarter of 2022, pulling revenue down 66% compared to the same period in 2021.

The first two quarters of the year generated most of the revenue, while the third quarter's liquidation of associates contributed most of the profit. In the third quarter of 2022, Gilimex outsourcing partner Garmex Saigon (GMC) saw revenue plummet from hundreds of billions of dong to VND 11 billion.

Gilimex was Amazon's main partner from 2014 to 2022. During that period, Gilimex invested tens of millions of dollars in manufacturing facilities to build steel and fabric warehouses used to store goods in its warehouses. Amazon employs more than 7,000 employees at multiple factories. Goods in the warehouse are moved by robots, which speeds up the fulfillment of online orders and also saves workers from having to jog around large facilities.

Even at the time of the epidemic, Gilimex continued to grow with revenue by 2021 exceeding the milestone of VND 4,000 billion. From the fourth quarter of 2021 to the second quarter of 2022, the revenue of this company still stands at about VND 1,300 billion per quarter, among the top in the industry.

According to Mirae Asset Vietnam Research, 85% of Gilimex's export revenue comes from Amazon, with orders worth $146.6 million (over VND 3,400 billion) in 2021. Gilimex has turned down other major customers including including IKEA and Columbia Sportswear to meet Amazon's needs.

Thanks to this outstanding growth, Gilimex became a bright spot in the past 2 years and the stock price also galloped from VND 10,000/share to VND 83,000/share before turning down.

Regarding the upcoming prospect, Gilimex's textile and garment export segment is forecasted to continue to face difficulties. According to the Vietnam Textile and Apparel Association (VITAS), the textile and garment industry will witness a sharp decline in orders in the next two quarters amid high inflation and weakening global apparel demand.

The same plight

Gilimex's story is not a special case in the textile and garment industry because before that Song Hong Garment (MSH) and Thanh Cong Textile and Garment (TCM) were in a similar situation when a major export partner went bankrupt.

On July 13, 2020, RTW Retailwinds Inc., the parent company of New York & Company - the largest partner of Song Hong Garment at that time, filed for bankruptcy protection with US authorities due to insolvency. payment capacity.

It is known that the revenue of New York & Company accounted for about 13% of the total revenue of Song Hong Garment in 2019, about VND 575 billion. The company makes sales on orders from New York & Company (buyer) through a partner of the buyer, Easy Fashion Macao Offshore Limited. According to the agreement between the two parties, the payment of debts related to the sales transactions for the buyer will be done through Easy Fashion. The payment term for these debts is 90 days.

By the end of 2020, the Company's receivable balance from sales transactions to New York & Company was VND 218 billion. In which, the recoverable value is VND 64.5 billion, Song Hong Garment has to make provision for bad receivables of VND 153.5 billion. By the second quarter of 2021, Song Hong Garment has sold the above receivables with a recovered value of VND 80 billion.

According to the data in the prospectus, New York & Company is one of the three big traditional customers of Song Hong Garment in recent years, accounting for 25% of the total revenue of the FOB segment (the business segment accounts for about 70% of total revenue). of the Company), the largest among the main customers.

As soon as difficulties hit, Song Hong Garment had to handle difficulties caused by orders from New York & Company and quickly find new sources of orders, upgrade infrastructure in the direction of automation… From the end of the quarter In January 2020, Song Hong Garment established a Debt Collection Supervision Board and only allows customers to owe $2 million, if customers pay late, they will stop exporting goods.

Production activities of factories were maintained relatively stable and anticipated the recovery trend. Photo: Quy Hoa.

Mr. Bui Duc Thinh, Chairman of Song Hong Garment, shared in the last General Meeting of Shareholders: “The sales team has been very flexible and proactive in exploiting new customers and orders to ensure that they meet customer requirements. of factories. The production activities of the factories were maintained relatively stable and anticipated the trend of recovering garment demand from export markets.

Going through difficulties at the time of the COVID-19 epidemic, plus difficulties after the epidemic and lost orders, in 2022, Song Hong Garment achieved VND 5,521 billion in revenue, up 16.3% over the same period, profit pre-tax profit reached VND 439 billion, down 19.1% compared to 2021. However, the Company still guaranteed to pay a 25% dividend in cash. Compared to the plan approved by the General Meeting of Shareholders, the Company's revenue increased by 12.7%, and profit before tax was 12.2% lower.

Sharing about the business situation of the industry and Song Hong Garment at the present time, the company representative said that American and European corporations are moving factories to geographical locations such as Central America and Africa. to reduce transportation and labor costs.

However, complicated goods and difficult goods still do in Vietnam. This is a positive signal for large businesses. “Corporations like Walmart, Target... still increase orders with Song Hong Garment. The situation is difficult in general, but we are still developing stably and financially," he said.

Regarding the situation of orders this year, Song Hong Garment said that there are orders every year, but the goods are more or less. Currently, for knitwear, firms tend to move to other markets, so the third quarter may be a little difficult in terms of orders, in the fourth quarter, orders will be abundant.

Not only Song Hong Garment, but at the end of 2018, Thanh Cong Textile and Garment also faced a major incident in the US, Sears Holdings, which filed for bankruptcy protection. Along with Sears' bankruptcy protection are 49 subsidiaries, including 2 companies, Sears, Roebuck, and Co. and Kmart Corporation are having a purchase transaction with Thanh Cong Textile and Garment.

According to estimates of Thanh Cong Textile and Garment at that time, these two companies contributed about 7% of the Company's revenue, equivalent to the loss from this bankruptcy recorded from 175-224 billion. The 2018 consolidated financial statements show the receivables of Thanh Cong Textile and Garment from Sears, Roebuck and Co. and Kmart Corporation is more than VND 100 billion, of which, the Company has made provisions about VND 79 billion. Up to now, this enterprise has not recovered the above receivables and raised the provision for bad debts to more than VND 99 billion.

Having not recovered from the difficulties caused by customers' bankruptcy, the Company faced difficulties again because of the arrival of the COVID-19 epidemic. As of 2021, debts and effects from bankrupt customers still haunt this company. According to the financial report for the first quarter of 2021, Thanh Cong Textile and Garment has a short-term receivable of more than VND 405 billion, an increase of nearly 43% compared to the beginning of the year. Sears' debt alone has reached nearly VND 100.5 billion, accounting for 25% of the total short-term debt structure.

In fact, after an order problem with an American partner, Thanh Cong Textile and Garment has focused more on large orders and finding new markets, especially spreading orders to many different markets. The Asian market is accounting for a major proportion of the export structure of Thanh Cong Textile and Garment (accounting for 58%), followed by the Americas (36%) and Europe (5.08%).

Before Gilimex, another listed company also suffered from being too dependent on one partner. Specifically, in March 2019, YouTube announced its decision to terminate its cooperation with the Yeah1 multi-channel network owned by Yeah1 Group (stock code YEG). Operational problems with YouTube have plunged Yeah1 into the biggest crisis in history. Despite claiming to be back soon, 6 months, 1 year, and 3 years, Yeah1 Group's promise has not yet come true. Strong claims to the Giga1 ecosystem have also failed and the media commerce segment has yet to bear fruit.

Officially facing shareholders at the 2019 General Meeting of Shareholders, Nguyen Anh Nhuong Tong frankly admitted that after the incident with YouTube, he had learned a great lesson: the lesson that Yeah1 Group had to spend thousands of billions of dong. in return, a lesson for Yeah1 to continue reaching out to the international market, a thinking lesson "Why depend on a partner", "You shouldn't build a house on someone else's land" and a lesson for yourself. The Group's leadership has never been foreseen.

Sharing about the business plan for 2023, at the last General Meeting of Shareholders in 2023, Gilimex leaders said that the business has added new customers, with revenue from Amazon accounting for 15-20%, and the weather revealed that the Amazon case has passed the most important step, which is processing the file and is expected to be resolved completely in 2023.