H&M coming – Kommersant newspaper No. 173 (7374) of 09/20/2022

H&M has decided on a plan to wind down business in Russia. The company intends to close its stores beyond the Urals by the end of October: we are talking about 20 retail outlets of the network. In parallel, the retailer will abandon less profitable stores in small towns in the central part of the country. According to experts, the process of changing the tenant for shopping centers can take a whole year. The vacated areas in Siberia and the Far East can be occupied by local brands. It will be more difficult for large federal networks to do this due to significant logistics costs.

Until the end of October, H&M, which also manages the Monki, Weekday, Cos, Other Stories, Cheap Monday brands, plans to close its stores in the cities of Siberia and the Far East, two sources told Kommersant in the retail real estate market. In the central part of the country, the retailer will curtail business gradually, starting with the closure of the least profitable stores, one of Kommersant’s interlocutors clarifies. The H&M press service did not respond to Kommersant’s request.

H&M entered the Russian market in 2009. By early 2022, the company operated almost 170 offline stores. According to CORE.XP, the chain has about 20 stores outside the Urals. In March of this year, the Swedish retailer suspended operations in Russia due to the military operation in Ukraine, and in June announced its withdrawal from the Russian market. Since August, H&M has reopened its brand stores to sell off leftovers.

H&M estimated the cost of closing a business in Russia at about 2 billion Swedish kronor, or about 11 billion rubles. According to SPARK-Interfax, the revenue of H&M LLC in 2021 amounted to almost 71.6 billion rubles, net profit – 6.9 billion rubles.

Earlier it became known that H&M paid nine months’ rent in advance for its flagship store in the Akter Gallery on Tverskaya Street, and also paid off all fines and penalties for not doing business and late opening a store in the Moscow Columbus shopping center (see . “Kommersant” dated August 26). A Kommersant source in the retail real estate market claims that in some locations in Moscow, the Swedish retailer is extending lease agreements until the end of the year.

Alexey Vanchugov, managing partner of Vanchugov & Partners, believes that the change of tenants in the stores of Siberia and the Far East, which are now occupied by H&M, may take an average of six months to a year.

This process will also be influenced by the timeframe in which landlords will be able to agree with H&M on the amount of penalties for early termination of lease agreements, adds Nadezhda Tsvetkova, head of CORE.XP retail space leasing. According to her, the retailer has already agreed with some shopping centers and H&M will vacate the premises by November. However, in those facilities where there are no such agreements, landlords may be forced to apply to the courts, which will delay the release of the premises, the expert does not exclude.

According to Svetlana Kuzmina, director of retail real estate at Accent Capital, it will not be easy for owners of shopping centers in Siberia and the Far East to find a replacement for H&M. “Regional specifics will complicate the task even more, because in order to enter a new local market, potential tenants will have to develop their own logistics there, which is quite expensive,” she explains. Mr. Vanchugov believes that the vacated areas in the cities of Siberia and the Far East can be occupied by local brands, since it is easier for them to establish logistics and supply of goods.

According to Ms. Tsvetkova, the least profitable H&M stores, which could potentially close soon, are mainly located in cities with a population of up to 500,000 people. Today, Russian brands Melon Fashion Group (brands Zarina, Befree, Love Republic and Sela), Lime, Snow Queen, as well as the Golden Apple cosmetics network, are applying for H&M sites in the regions, the expert says. The press service of Melon Fashion Group noted that they monitor the state of the market and consider various development options. In Lime, the Snow Queen and the Golden Apple, they did not respond to Kommersant’s request.

Alina Savitskaya