Jewelry company Folli Follie, based in Greece, has recently been thrust into the spotlight due to a major financial scandal that has rocked the business world. An audit conducted by PwC has uncovered that the company had exaggerated its revenue for the year 2017 by a staggering amount exceeding 1 billion euros. This revelation of the significant discrepancy in reported earnings has left Folli Follie in a precarious position, facing severe consequences as a result.
In response to the financial misstatements coming to light, Folli Follie presented a rescue plan that was suggested by bondholders, unfortunately, this plan fell through. As a next step, the company introduced an alternative restructuring proposal for its creditors, with hopes of receiving court approval by June 2020. The board of FF Group expressed confidence in the company’s future, firmly believing that the restructuring proposal is essential to avoiding the company’s inevitable bankruptcy.
The turmoil for Folli Follie escalated further last year when a hedge fund report raised concerns over the company’s accounting practices. This led to a suspension of the company’s shares and the subsequent resignation of founder Dimitris Koutsolioutsos. Despite Koutsolioutsos retaining a significant 35 percent ownership stake, he chose to step down during these challenging times. Furthermore, China’s Fosun, which holds a 16 percent stake in Folli Follie, found itself impacted by the unfolding developments.
Alongside the restructuring proposal, Folli Follie divulged the findings of the PwC audit which unveiled a drastic reduction in turnover to 359.2 million euros from the initially reported 1.4 billion euros. Additionally, the audit exposed a net loss of 136.2 million euros as opposed to the previously declared net profit of 216.8 million euros. Despite these revised figures, the company reiterated that its net asset value remains in the positive.
Presently, Folli Follie is facing a daunting debt of approximately 430 million euros that needs to be repaid by 2021. The company, renowned for its distribution of global apparel brands such as Nike and Calvin Klein in Greece, alongside luxury jewelry, employs roughly 5,000 individuals across domestic and international markets like China and Japan.
As Folli Follie strives through its financial restructuring in light of the scandal’s fallout, the company’s primary focus is on maintaining its global market presence and fortifying its corporate governance practices. The path to recovery for this esteemed Greek luxury brand is undeniably challenging, however, Folli Follie remains hopeful about its future despite the significant financial setbacks it has endured.
Useful links:
1. Reuters article on Folli Follie’s stock plunge
2. Bloomberg report on Folli Follie founder’s resignation
