Polish retail giant LPP accepts 1.8m zlotys fine over disclosure failings linked to Russia exit

Polish clothing giant LPP, owner of brands such as Sinsay, Reserved and Cropp, has agreed to pay a 1.8 million zlotys (€420,000) fine to settle an investigation by Poland's financial regulator into suspected failures by LPP to meet disclosure obligations during the sale of its Russian business.

The Financial Supervision Authority (KNF) has since last year been investigating LPP over suspicions that it did not publicly disclose information regarding the key terms and structure of the sale of its Russian subsidiary, Re Trading OOO, in 2022.

The company, however, emphasizes that the regulator's findings are unrelated to a 2024 report by US investment research firma Hindenburg Research that raised questions about the sale of the Russian business and led to a temporary 35% drop in LPP's share price.

In March 2022, LPP first announced that it would suspend operations in Russia following the full-scale invasion of Ukraine. By the end of April, it had closed its Russian stores, and in late April confirmed its decision to sell its local entities due to geopolitical uncertainty.

In May 2022, LPP said it had selected a buyer, described as a “Chinese consortium,” for Re Trading OOO. The transaction, finalized in June 2022, marked the group's full exit from Russia after two decades of operations in the country. Sales in Russia accounted for around one-fifth of LPP's global business.

However, in March 2024, Hindenburg Research alleged that the divestment was a façade, accusing LPP of continuing to operate in Russia through a shell buyer.

The report claimed LPP products remained available in Russia, that goods were being rerouted via Kazakhstan , and that company insiders confirmed continued oversight from LPP's headquarters.

It caused a sell-off in LPP shares, with the stock dropping more than 35% on 15 March 2024 – wiping €2.5 billion off LPP's market value. Hindenburg disclosed it had taken a short position in LPP – i.e. betting on a price drop – before the publication of the report.

LPP has strongly denied the accusations, calling the report a “disinformation attack” aimed at manipulating its stock price. The company reported the matter to Polish prosecutors.

In October 2024, the KNF launched administrative proceedings against LPP, stating the company may have breached its disclosure obligations by failing to promptly inform the public about the key terms and structure of its Russian divestment deal.

LPP has stressed that the KNF's investigation was “not related to the Hindenburg Research report and does not confirm the assurance” made by the research firm.

In April 2025, as part of its engagement with the KNF, LPP disclosed details of the 2022 sale. The transaction was valued at $135.5 million, to be paid in installations by December 2026. The buyers were also to pay over 1 billion zlotys for merchandise and repay a €26.5 million loan.

LPP said it had provided transitional support to facilitate logistics and product delivery and granted the buyer temporary rights to sell goods under its brands already in transit or produced for the Russian market.

A “put” option was included, allowing the buyer to return the business in case of poor performance. The agreement also stipulated that the buyer would cease using LPP trademarks and would rebrand stores.

Asked by the XYZ news service last month why the company “did not immediately explain” the transaction in detail, LPP's CEO Marek Piechocki said that, when they announced the withdrawal from Russia, “the environment was completely different from now.”

“We followed external legal opinions and not just our own perspective,” he said. However, on Monday this week, LPP's management said it had accepted the KNF's proposed settlement, and an administrative decision finalizing the arrangement is expected to follow.

According to the financial daily Parkiet , which cited information from LPP, the KNF proposed leniency by reducing the fine by 40%. This suggests the original penalty was set at 3 million zlotys.

“The decision to reduce the fine by as much as 40%, to 1.8 million zlotys, equivalent to just 0.01% of our Group's revenue last year, is positive news for the capital market, as it resolves uncertainty for our investors regarding the ongoing sanction proceedings,” said Sławomir Łoboda, vice-president of LPP.

Under the law, the KNF could have fined LPP by as much as 2% of total annual revenue, which reached last year over PLN 20 billion. The regulator has not publicly commented this week on its agreement with LPP.

Despite the controversy and brief market shock following the Hindenberg report, LPP's share price has since rebounded and the company remains one of Poland's most valuable listed firms.

Main image credit: LPP/Press materials