KUALA LUMPUR, Nov 14 — The Ministry of Finance has identified three factors that are said to have contributed to the collapse of online fashion business FashionValet, resulting in financial losses for Khazanah Nasional Bhd (Khazanah) and Permodalan Nasional Bhd (PNB).

Berita Harian reported Finance Minister II Datuk Seri Amir Hamzah Azizan as citing the Covid-19 pandemic as a major factor, which disrupted FashionValet’s physical operations and led to a sharp decline in demand for premium clothing, including hijabs.

“As FashionValet sought to transform into a multi-channel shopping platform, it rapidly expanded its physical store presence.

“However, the Movement Control Order (MCO) during Covid-19 significantly hindered these operations and diminished demand for premium products,” he explained in response to a question from Syerleena Abdul Rashid (PH-Bukit Bendera) during Minister’s Question Time in the Dewan Rakyat today.

He added that some less successful stores were eventually forced to close.

The second factor, he noted, was the shift in e-commerce trends, with the rise of local fashion brands — particularly in modest fashion — using independent e-commerce channels and accessible platforms like Facebook, intensifying competition for FashionValet.

“This shift forced FashionValet to shut down its platform and instead focus on its own brands, dUCk and LILIT,” he was quoted as saying by the national daily.

The third factor, Amir Hamzah explained, involved funding challenges.

FashionValet faced cash flow constraints, and although it sought new capital, existing shareholders Khazanah and PNB were unwilling to increase their investment due to associated risks.

“The challenging fundraising environment at that time also hindered FashionValet’s attempts to secure fresh funding,” he stated.

Amir Hamzah acknowledged that, as minority investors, Khazanah and PNB took proactive steps to support FashionValet, providing strategic guidance and financial advice to its senior management.

However, the challenges proved too great, exacerbating the company’s financial difficulties, he said.

“To remain operational and resolve cash flow issues, FashionValet urgently required capital from new investors, but received limited interest,” he added.

Meanwhile, he noted that Khazanah and PNB recognised their returns from FashionValet did not meet projections, although the government plans to review governance processes to strengthen GLC management.

“With the Malaysian Anti-Corruption Commission (MACC) investigating and an internal audit underway, Khazanah and PNB must be allowed time to complete their review.

“The final findings will help improve governance within the involved government-linked investment companies (GLICs),” he said.

Reflecting on the 2017 investment decision, Amir Hamzah explained that when Khazanah and PNB evaluated FashionValet, it was a growing e-commerce platform with over 400 brands, 15,000 products, annual revenues nearing RM60 million, and an annual growth rate exceeding 100 per cent since 2013.

“Investments by Khazanah and PNB followed thorough evaluation and due diligence, made at market values that reflected FashionValet’s growth potential at that time,” he was quoted as saying.

Funds from Khazanah and PNB supported FashionValet’s regional expansion as an e-commerce platform for local brands, including an increase in physical stores in line with its multi-channel aspirations and development of wholly-owned brands.

“FashionValet recorded positive cash returns for several years after receiving investments from Khazanah and PNB.

“Both entities, however, remained aware of the challenges FashionValet faced in its expansion efforts,” he concluded.