Clothes were carried out according to losses – Newspaper Kommersant No. 59 (7504) dated 04/06/2023

Foreign retail consumer brands that curtailed or temporarily suspended their business in Russia due to military operations in Ukraine, according to consultants, could lose up to $ 2 billion in total. In general, this did not seriously affect the global chain business, since sales in the Russian Federation were provided only 3-5% of total revenue. At the same time, formally, the sanctions almost did not affect the segment, except for luxury goods. Most brands left of their own free will or due to difficulties with organizing a business.

The total amount of losses in the form of lost profits of foreign brands operating in non-food retail and announcing their withdrawal from the Russian market exceeded $ 1.3-1.5 billion, two consultants who accompanied the closure of the business of a number of networks in the Russian Federation told Kommersant. Taking into account the temporarily non-working stores of chains that have not announced their departure, the amount can reach $ 2 billion, one of Kommersant’s sources adds. Since February 24, 2022, after the outbreak of hostilities by the Russian Federation in Ukraine, more than 180 foreign networks have limited their activities in Russia, about 15 have announced plans to leave the market, calculated in NF Group.

Only a part of the departed chains, according to Ruslan Petruchak, BGP Litigation’s Dispute Resolution and Bankruptcy Practice Advisor, can justify their departure as “an attempt to hedge reputational losses.” The reason for the departure of almost half of the brands is the existing restrictions on foreign trade operations of the Russian Federation with a number of countries, changes in the exchange rate, logistical failures, difficulties with transactions, he adds.

Swedish H&M, Spanish Inditex (brands Zara, Bershka, Massimo Dutti and others) and IKEA have the most tangible losses — together they account for more than $1 billion.

H&M Group, in its reporting for 2022, estimated the loss from leaving the Russian market at $363 million. Inditex has over $300 million, Swedish IKEA has almost $400 million, and Decathlon accounts for up to $140 million, Kommersant sources say. According to one of them, the luxury fashion retailers of the French Hermes and the Italian Moncler also suffered significant losses, having received a total loss of more than $200 million.

According to SPARK-Interfax, in 2021 the revenue of Zara CIS (now Novaya Moda), which managed Inditex stores in the Russian Federation, reached 57.2 billion rubles, which is 30% more year-on-year, H&M — RUB 71.5 billion (growth by 31%), IKEA Dom – 157.2 billion rubles. (growth by 22%). Hermes and Moncler did not publish data on the Russian market. In these networks, “Kommersant” did not answer.

Inditex sold its business in Russia to Middle Eastern investors. On Wednesday, Deputy Head of the Ministry of Industry and Trade Viktor Yevtukhov said that the government commission for foreign investment control approved this deal and soon more than 200 stores that Inditex used to have will open under new brands. At the same time, a year ago, the holding, as indicated in its report for 2022, had about 515 points of sale in the Russian Federation.

Among the brands that have not announced their departure, but whose stores in Russia remain closed for more than a year, Japanese Uniqlo, which has seen growing sales in Russia in recent years, may suffer significant losses, one of Kommersant’s interlocutors notes.

The latest results of Uniqlo Rus, the operating company of the retailer in the Russian Federation, were published for 2021, when its revenue, according to SPARK-Interfax, amounted to 26.9 billion rubles, which is an increase of 35% year-on-year and 38% than in 2019.

For many of the departed brands, the Russian market was not a priority, which is why such a radical decision was made, notes Ruslan Petruchak. These chains’ business in the Russian Federation accounted for no more than 3-5% of the total revenue, agrees the partner of Yakov and Partners (formerly McKinsey) Dmitry Vodyannikov.

Brands will minimize losses from leaving the Russian Federation by increasing their presence in popular destinations and active participation in e-commerce, Mr. Petruchak believes.

In particular, the Inditex report indicates that the holding now intends to actively develop in the Asian markets. But the presence in the Russian Federation, Dmitry Vodyannikov believes, for many of them was “access to production and even engineering centers of competence, deeply embedded in global and regional business processes.”

Networks that have not yet announced their departure, hold fears of “irretrievable loss of such a market,” the expert believes. According to GlobalData, until the spring of 2022, the Russian Federation accounted for up to 10% of all clothing sales in European markets, the same amount in Italy. For comparison: in Germany this figure reached 16%, in France – 13%, in Spain – 6%.

Khalil Aminov