KUALA LUMPUR: The Finance Ministry has outlined three key unforeseen challenges faced by Fashion Valet Sdn Bhd (FashionValet), which led to a loss of over RM47 million in investments from Khazanah Nasional Berhad and Permodalan Nasional Berhad (PNB).
Finance Minister II Datuk Seri Amir Hamzah Azizan said that the company's struggles were primarily due to the impact of the Covid-19 pandemic, shifts in e-commerce fashion trends, and difficulties in raising funds.
"FashionValet aimed to become an omnichannel shopping platform, which led to a rapid expansion of its physical stores. However, the Movement Control Order (MCO) during the Covid-19 pandemic severely restricted its physical operations and caused a significant downturn in the market for premium apparel, including scarves. As a result, several underperforming stores had to be closed," he told the Dewan Rakyat today (Nov 14).
Amir Hamzah also pointed to the rise of local fashion brands, particularly those specialising in modest fashion, which increasingly relied on their own e-commerce platforms and easily accessible alternative channels like Facebook.
This created intense competition, forcing FashionValet to shut down its platform and shift focus to its in-house brands, such as dUCk and LILIT.
He also said that the company struggled with raising funds, which led to cash flow constraints.
Despite efforts to secure new capital, existing shareholders, including Khazanah and PNB, were unwilling to increase their investment due to the risks involved.
"The fundraising market was challenging at the time, and despite FashionValet's attempts, they were unable to secure the necessary funds," he added.
While both Khazanah and PNB played a proactive role in supporting FashionValet, providing strategic guidance and financial advice, the company's financial situation deteriorated due to the compounded challenges it faced.
"To continue operations and address cash flow issues, FashionValet urgently needed new capital from external investors. However, the few offers received were insufficient, and the best available offer was accepted by all shareholders," he said.
Amir Hamzah acknowledged that the outcome of the investment did not meet initial return projections, but both Khazanah and PNB remained committed to strengthening their governance and oversight mechanisms.
"While the investment outcome was disappointing, Khazanah and PNB are committed to improving their investment strategies moving forward," he said.
Providing context on the investment made by Khazanah and PNB in 2017, he said that at the time, FashionValet had become a leading e-commerce fashion platform with over 400 brands and 15,000 products.
Amir Hamzah said the platform had generated nearly RM60 million in revenue that year and had experienced an annual growth rate of over 100 per cent since 2013.
The funds from Khazanah and PNB were initially used to expand FashionValet into a regional e-commerce platform for local brands, including the growth of its physical stores, he said.
He said FashionValet had recorded positive cash returns for several years following the investment, indicating that the company had initially shown promise before facing the challenges that ultimately led to its financial troubles.
Amir Hamzah was responding to a question from Syerleena Abdul Rashid (PH-Bukit Bendera) who had asked about the factors contributing to FashionValet's downfall.