LVMH cuts ties with Bono's ethical fashion brand Edun

PARIS (Reuters) - French luxury group LVMH (LVMH.PA) is parting ways with the eco-friendly Edun label started by singer Bono and his wife Ali Hewson, transferring its minority stake back to the founders as the firm winds down its U.S. operations.

LVMH said Edun was "restructuring its operations in preparation for its next chapter" following a joint review of the business.

"The founders remain committed to Edun's mission for sustainable fashion," a joint statement sent by LVMH said.

The company, which was based out of New York, will cease operations in the United States and already shut down its one store there in May, a source close to the firm said, confirming a report by website Business of Fashion.

Edun also sold its wares online and through 15 other outlets, although the current collection produced for spring and summer will be its last, while the label decides how to take the business forward, the source added.

Edun, headquartered in Ireland for financial matters, had been in the red for several years, filings with the Irish companies registry showed. It made a $6.3 million loss in 2016, according to the latest available accounts, with accumulated losses reaching $80.6 million.

The business is a very small part of the LVMH portfolio, which includes multi-billion euro brands such as Louis Vuitton and Christian Dior and also drinks companies such as champagne maker Moet & Chandon.

But LVMH's 2009 investment - for an undisclosed sum - underscored a move by big luxury groups toward promoting more sustainable fashion, an area they have since been building up.

Edun, launched in 2004, works with weavers and clothing workshops in Rwanda, Kenya and South Africa to help promote fair trade, and aims to source materials in an eco-friendly way, using recycled fabrics for instance.

The company is financed by shareholder loans, according to its filings for the 2016 financial year, which showed its net liabilities stood at $57 million. Shareholders had agreed to not seek repayment of their loans "for the foreseeable future", according to the documents.

Irish singer Bono, the lead singer of rock band U2 whose real name is Paul Hewson, did not immediately respond to requests for comment.

(Reporting by Sarah White; Editing by Keith Weir/David Evans)