Guess made an unfashionable decision – Kommersant

On the Russian fashion market, a transaction atypical for the present times took place. The American clothing manufacturer and retailer Guess bought back 30% from local partner Vyacheslav Shikulov, having received permission from the US Department of the Treasury to early exercise a put option from 2015. The deal could be related to the seller’s concerns about the continued operation of Guess in Russia.

Structures of the American clothing manufacturer and retailer Guess? Inc. consolidated 100% of Hess? Siayes, having bought out 30% in the company from entrepreneur Vyacheslav Shikulov. Changes to the Unified State Register of Legal Entities were made on May 22. At the head office of Guess, they did not respond to Kommersant’s request. Mr. Shikulov declined to comment.

From 2005 to 2010, Guess stores in Russia were developed by Jamilko, a major distributor of Western fashion brands. In 2011, an American company began to manage the Russian business on its own, and in 2016 Guess announced the involvement of a partner, which was Vyacheslav Shikulov. He also acts as a co-owner and CEO of the Russian structure of the Italian clothing brand Boggi Milano and owns the Robinzon Retail Group. The latter in 2022 became the main owner of the Russian chain of stores of the American suitcase manufacturer Samsonite, which now operates under the banner “Suitcase PRO”.

Information about the deal with Vyacheslav Shikulov is disclosed in the Guess report for 2022. As stated in the document, at the end of 2015, the parties entered into a put option, which provides for the right of the Russian partner to sell its 30% stake in local business and the obligation of the American company to buy out this share by December 31, 2025. In November 2022, the Russian partner of Guess exercised the option, and the company applied for permission for the transaction to the Office of Foreign Assets Control of the US Treasury Department (OFAC). The agency allowed the deal because the option agreement was concluded before the imposition of US sanctions, the Guess report said. The cost of Mr. Shikulov’s stake is €8 million (689.5 million rubles at the exchange rate of the Central Bank as of May 25).

Now Guess owns 44 stores in Russia and acts as a distributor for wholesale partners, the report says. It notes that the military actions of the Russian Federation in Ukraine did not have a significant impact on the activities of the Russian company. And all Guess shipments are being tested to limit the import of goods worth more than $300 or €300 per unit into Russia, in accordance with US and EU sanctions. In 2022, the revenue of the Russian Guess grew by 24%, to 4 billion rubles, net profit – 3.5 times, to 283.1 million rubles.

Dmitry Gabyshev, managing director of Peregrine Capital, calls a deal to consolidate business in Russia by an American company atypical in the current situation. In the absence of a put option agreement, it would be assumed that the Guess head office, on the contrary, would be interested in transferring the business to a Russian investor, he notes. According to Mr. Gabyshev, the Russian partner of Guess may have decided not to wait for the expiration of the put option due to the attractive current valuation of the stake or the risks for Guess’s further work in the country. The company’s report says that the opportunities to expand business in Russia are limited due to the US ban on new investments, and new export controls and additional sanctions are also possible.

According to Marina Malakhatko, Senior Director of СORE.XP, Guess is considered one of the most famous American brands in Russia and cooperates with large online platforms and department stores, including Lamoda, Stockmann, Lady & Gentleman, Rendez-Vous. According to the expert, at a time when most of the fashion brands in the “medium plus” segment have suspended their work, announced their departure or renamed stores, a favorable situation is developing for the continuation of Guess on the Russian market. This is also facilitated by the correction of rental rates and the gradual recovery of consumer demand, adds Ms. Malakhatko. But the risks, according to her, remain the high volatility of the ruble, the rise in the cost of purchases, logistics, and the reduction in the number of opportunities for foreign exchange settlements with foreign counterparties.

Alina Savitskaya