In a report, the short-seller alleged that the Polish company — one of the biggest clothing retailers in eastern Europe — hasn’t fully divested its Russia business, and has been selling its goods through third parties. LPP said it was preparing to respond to the claims.

Before the war in Ukraine, Russia was the biggest market for LPP following Poland. The retailer, which owns several brands including its flagship Reserved label, suspended its fast-growing Russian operations in March 2022 — in the wake of the invasion of Ukraine — and sold its Russian unit to a Chinese consortium two months later.

“We think LPP devised an elaborate sham ‘divestment’ strategy to continue retailing in Russia while trying to fool investors and consumers in Poland, Ukraine, and its other markets into thinking otherwise,” Hindenburg said in its report.

Strong public pressure pushed Polish companies to retreat quickly from Russia following the start of war in Ukraine in February 2022, with shoppers boycotting brands which failed to do so.

Hindenburg said it dispatched “secret shoppers” to Far East Services’ stores in Moscow and St. Petersburg in December, where nearly all garments they found and photographed had “identical designs and colors to fall/winter collections in LPP’s online catalogues in Poland.” 

This, the short-seller noted, indicated that LPP products were still “somehow making their way into Russia at least 18 months after the claimed divestiture.”

Hindenburg’s report follows some high-profile bearish wagers against India’s Adani Group and Icahn Enterprises Inc. in the US in 2023, rounding out a remarkable year for the activist short seller. The firm, founded by Nate Anderson, targeted Swiss fintech Temenos last month.