International clothing chain’s loss exceeds hundreds of millions of dollars when it withdraws from Russia
After the outbreak of the Russia-Ukraine conflict, international clothing chain stores have suspended their business in Russia. Market experts estimate that if these companies completely withdraw from the Russian market, the loss will be conservatively estimated at US$800 million.
On July 18, H&M officially announced the end of its business in Russia. The total loss from closing all stores will reach 2 billion Swedish kronor (approximately 190 million U.S. dollars). Its Russian partners will also be affected. For example, the shopping center owner has filed a lawsuit and the losses are estimated to be 2.3 billion rubles (about 30 million U.S. dollars). Market experts said that international brand chain stores are the anchor tenants of shopping malls and bring stable purchase traffic to them. It is currently difficult to find replacements.
Market experts say the amount of losses will be higher if retailers cannot sell remaining merchandise and successfully resolve the issue of terminating existing long-term leases. Some foreign retailers that announced they were suspending operations in Russia have begun to receive claims from landlords.
According to information obtained by the Russian businessman, the Spanish Inditex (Zara, MassimoDutti, Bershka, Stradivarius, Pull&Bear chain stores) may lose approximately US$300 million by withdrawing from the Russian market. Japan’s Uniqlo lost approximately US$150 million to US$170 million, and France’s Decathlon lost a similar amount to Uniqlo. The above companies have suspended operations in Russia, but have not yet announced whether they will eventually withdraw from the Russian market.
Statista data shows that Uniqlo accounted for nearly 1.3% of the total sales of Russian clothing chain stores in 2020, H&M accounted for 4%, and Inditex accounted for 8.5%.
It will be difficult for shopping center operators to find substitutes for international brands. According to Focus’ assessment, international clothing retailers account for up to 34% of the rental area in Russia’s large shopping malls, and 22% in small shopping malls. Large international brands attract foot traffic to shopping malls, and it is difficult to find substitutes under the current circumstances. Even if local retailers or Turkish and Chinese brands can replace the departing international chains, it will be difficult for shopping mall operators to achieve the same level of revenue as before.
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