Leeds stated that "continuing uncertainty" remains in global markets and highlighted that its impact on the German economy, in particular, had deepened.
The AIM-listed group said local management had reviewed options available to both its trading companies, Hemmers-Itex Textil Import Export and its subsidiary Stoff-Ideen-KMR to ensure the company can meet "ongoing challenges".
"KMR has continued to make losses in the current financial year and, following an independent review, Hemmers management have decided that the KMR business is unsustainable and has today placed KMR into an insolvency process. During this process, the insolvency administrator will control and operate KMR to realise its assets in order to pay any outstanding creditors," said Leeds.
Leeds added that it remains "committed" to returning Hemmers to profitability and said sales for the current year were in line with internal expectations.
As of 1225 BST, Leeds shares were down 6.67% at 14.0p.
Reporting by Iain Gilbert at Sharecast.com