TOKYO -- China's Shandong Ruyi Group wiped away the top two leaders at Japanese apparel unit Renown on Thursday, writing another chapter in a strained partnership that has failed to bear fruit a decade later.
"We are facing a tough business environment, so we want to review the leadership," a Ruyi representative said at general shareholders meeting that day. The Chinese textile group first took a stake in Renown in 2010 and has since become majority shareholder.
Renown CEO Yoshiyuki Jinbo and Chairman Minoru Kitabatake failed to win reappointment. The Renown board decided instead to promote director Kenji Mori to CEO while naming both Jinbo and Kitabatake as advisers.
Ruyi first expressed opposition to the reappointment of Jinbo and Kitabatake in mid-March, after an agenda for the shareholders meeting had been issued. The net loss of 6.7 billion yen ($61.2 million) posed by Renown for 2019, marking a second straight year in the red, was undoubtedly at the root of Ruyi's dissatisfaction,
The loss resulted largely from a 5.3 billion yen allowance for bad debt, booked because Renown could not collect on accounts receivable from its parent.
Renown urged Ruyi not to vote against the executive appointments but failed to sway the company.
Kitabatake and Ruyi Chairman Qiu Yafu had been instrumental to their companies' partnership. Renown has since scrapped more than half of its 40-plus brands, getting rid of unprofitable businesses.
But the partnership did not pan out as planned. The companies originally hoped to combine Ruyi's know-how in textiles with Renown's product development capabilities. They launched a Chinese joint venture in 2011 with the goal of opening 1,000 stores selling Renown clothing but shut down the business in 2014 after it failed to perform.
Renown's overseas businesses, as in China, "did not live up to expectations," Qiu told Nikkei in a 2017 interview.
Ruyi itself faces heavy headwinds.
"Overseas sales have declined amid trade tensions between China and the U.S., and sales in China are suffering from an economic slowdown there," said a source at Renown. China's apparel industry also is coping with store closures due to the coronavirus.
The Chinese company has been aggressive in buying Western brands as well, including British menswear label Aquascutum. But few have done particularly well. Ruyi recently booked losses from layoffs at one of its acquired brands, according to Chinese media. Some outlets also report that Ruyi failed to settle payments with trading partners.
Renown hopes that Mori will help boost sales not only at department stores, but also through other outlets, given his experience with product development. Still, swapping out the CEO alone is expected to yield limited results as the coronavirus wreaks havoc on retail.
"I don't understand what Ruyi is trying to do," one Renown source said, echoing a popular sentiment within the company.