Luxury international brands are closing stores in Russia

Luxury international brands, which suspended operations in Russia after the outbreak of the military conflict in Ukraine and initially took a wait-and-see approach, are beginning to get rid of their stores. Following Chanel, the Swiss watch manufacturer Swatch Group has halved the number of its Russian outlets. Italian Prada and Fendi followed the same path. It is simply not profitable for retailers to rent space for non-operating stores for a long time.

The Swatch Group (brands Breguet, Harry Winston, Omega, Rado) in 2023 terminated the lease agreements for 15 of its stores in Moscow, St. Petersburg and other cities, according to Swatch Group Rus reports. The company has 13 points left. The closure of its three Moscow stores, including a boutique in GUM, is also reported in the Prada report. It adds that at the beginning of 2024 the brand still has six sales points in Russia.

The Italian Fendi reported in its financial statements that it refused to lease three premises in Moscow. At the same time, as follows from the materials of Fendi Ru, the rental contracts for two boutiques – in GUM and TSUM – are still valid. Before this, as Kommersant reported on March 22, the Russian representative office of Chanel began to break lease agreements for premises under boutiques.

All these brands suspended the supply of goods to the country after the outbreak of the Russian-Ukrainian military conflict, as well as the embargo imposed by the EU and the USA on the import of clothing, shoes and accessories into the Russian Federation over $300 and €300 per unit of product. According to the IBC Real Estate report, 27% of luxury foreign retailers suspended their store operations at the time, while continuing to occupy space in key shopping corridors and shopping centers. Most of them belong to large groups – LVMH (Christian Dior, Givenchy, Bvlgari), Kering (Alexander McQueen, Balenciaga), Richemont (Cartier, Chloe, Piaget).

These luxury representatives held on, hoping for a change in the geopolitical situation, but it is impossible to endlessly invest money in idle stores, says fashion analyst Olga Steinberg. According to Marina Malakhatko, senior director of CORE.XP, these retailers began cutting staff and closing locations at the end of 2022. According to Swatch Group Rus, the number of company employees has tripled over the past two years, to 129 people at the end of 2023.

In March 2024, in place of the Prada boutique in GUM, a store of the Chinese premium brand Ellassay opened. A Bork hardware store will open in place of Fendi on Stoleshnikov Lane. The abandoned space is also occupied by Russian brands, for example Oskelly instead of Versace and 12storeez instead of Brunello Cucinelli on Stoleshnikov Lane, says Ekaterina Nogai, head of the research and analytics department at IBC Real Estate. But new tenants can no longer offer property owners the rates that luxury brands could afford, so landlords are not interested in severing relations, says Marina Malakhatko.

At the same time, there are cases on the market when property owners impose strict conditions on new tenants: only a short-term lease agreement and a ban on any changes in the interior, notes R4S commercial director Irina Burenko. She suggests this may speak to landlords’ expectations of bringing back luxury brands to the square.

But there are brands that continue to fulfill contractual obligations under lease contracts, for example, Gucci, Van Cleef & Arpels on Petrovka, Hermes, Louis Vuitton on Stoleshnikov Lane, Dior in the Evropeisky shopping center, Ms. Nogai points out. However, according to her, the terms of their lease agreements are coming to an end, and the question of their future activities in Russia remains open.

Several European brands continue to operate in the country and even expand their presence, including the German Philipp Plein and a number of Italian brands, notes Olga Steinberg. The key European brands remaining in the Russian Federation are mainly collected in stores managed by Bosco, and none of them are expanding their presence, Irina Burenko disagrees. According to her, now only Korean and Chinese brands appear on the Russian market.

Polina Gritsenko