Gilimex Faces Unprecedented Losses as Amazon Abruptly Reduces Orders
Garmex Saigon (GMC), a well-known company in Vietnam’s garment and textile industry, has recently released its Q2/2023 business results, shedding light on its challenging financial situation. The company’s net revenue for the quarter was a mere $4,208, a significant decrease compared to the $5.2 million achieved in the same quarter of the previous year. GMC reported a net loss of approximately $520,833.
By the end of the first half of the year, GMC’s net revenue stood at over $333,333, marking a steep decline of 97% compared to the previous year. The company also experienced a net loss of more than $1.38 million, in contrast to a profit of over $166,667 in the same period the previous year. As of June 30, GMC’s accumulated loss exceeded $2.25 million.
During its peak, GMC’s quarterly revenue ranged between $10.4 million to $16.67 million, employing a workforce of several thousand. However, the company’s workforce has reached a record low, with only 41 employees remaining at the end of the quarter. This represents a reduction of 144 compared to the end of March and a decrease of 1,941 since the beginning of the year. Since the start of 2021, the company has let go of up to 3,769 employees.
A primary factor contributing to GMC’s declining business situation is the loss of revenue from its partner, Production, Trading, and Import-Export JSC Binh Thanh (Gilimex, GIL). In the first half of 2022, Garmex earned nearly $9.33 million from providing orders to Gilimex. However, this revenue stream disappeared in the same period of 2023, possibly due to the fallout from Gilimex’s lawsuit against e-commerce giant Amazon Robotics LLC. This legal dispute has not only impacted Gilimex but also affected partner enterprises like Garmex Saigon.
Gilimex itself reported a record loss of nearly $1.63 million in the first quarter of the year. For 2023, Gilimex has set a business plan with a revenue target of $62.5 million and a projected pre-tax profit of $4.31 million, a decrease of 77% compared to 2022. This decline in business planning is a result of the sudden downsizing of orders by the American e-commerce giant Amazon.
Regarding the dispute between Gilimex and Amazon, the market was surprised in 2022 when Gilimex filed a lawsuit against Amazon. According to the minutes from Gilimex’s 2023 annual shareholder meeting, the lawsuit is currently progressing through subsequent stages. Gilimex had a long-term agreement with Amazon, involving the purchase of raw materials, adjustment of factory capacity, and organization of the workforce to meet the growth of its partner. As a result, Gilimex invested tens of millions of USD into manufacturing facilities and warehouses for Amazon’s inventory. The company employed over 7,000 workers in various factories to produce storage units for Amazon.
However, in April and May 2022, Amazon unexpectedly reduced its anticipated demand for the remainder of 2022 and 2023, leading to overcapacity in production and raw materials for Gilimex. Looking back at the period from becoming Amazon’s partner in 2014 until 2021, Gilimex consistently recorded high growth in both revenue and profit. The impact from Amazon caused Gilimex’s business indicators to plummet, resulting in a record loss in the first quarter of 2023. Consequently, the company is now focusing on investing in the industrial real estate segment and aiming to generate revenue between 2023-2025.