Hengdeli

Hengdeli Holdings Ltd. said its relationships with global luxury brands remain close and its financial policies are prudent after a Next Magazine report fueled concerns about the watchseller’s China operations.

The company has a “good relationship” with Swatch Group AG and LVMH Moet Hennessy Louis Vuitton SA and remains the largest retailer for the Omega and Rado brands in China, Hengdeli said in a statement yesterday. Hengdeli dropped 3.4 percent to close at HK$2.54.

The magazine last week said the company lost exclusive distribution licenses for Omega, Rado, Longines and Fendi in China, and had negative cash flow and high inventory. “Operating cash outflow’ was caused by faster expansion and the increased inventory reflected ‘‘strategic’’ building of international-brand stock, the watch retailer said in yesterday’s statement.

Hengdeli said it has been focusing more on retail since 2002 and the Omega, Rado and Longines wholesale business moved to a joint venture with Swatch in 2003.

Nick Hayek, chief executive officer of Swatch, which owns the Omega, Longines and Rado brands, in a phone interview last week forecast continued growth in mainland China and said he’s ‘‘very happy” about his company’s arrangement with its Chinese partner.

Kelly Fung, at Porda Havas International Finance Communications Group, a public relations firm representing Hengdeli, said she had no comment beyond the statement. LVMH, through an external spokesman, declined to comment.

Swatch Group owns 9.1 percent of Hengdeli, according to data compiled by Bloomberg. LVMH Moet Hennessy Louis Vuitton SA, whose brands include Fendi, holds 5.9 percent, the data show.

“We are shareholders and it’s going very well --- there is no change,” Hayek said of Swatch’s relationship with Hengdeli last week. “The development is very good. There is no irritation in our collaboration.”

To contact the reporter on this story: Anjali Cordeiro in Hong Kong at acordeiro2@bloomberg.net

To contact the editor responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.