River Island and New Look pull out of Russia amidt challenging trading
In the space of 10 days 2 major UK retail groups have pulled out of the Russian market. Both New Look (http://news.sky.com/story/1371186/new-look-exits-russian-and-ukraine-markets) and River Island have decided to abandon operation in Russia, and frankly I am not suprised. I have been working with Russia for the past 15 years and it’s never been easy. It’s always been on the radar list of retailers and brands looking at International expansion and although challenging, the rewards have been good.
Up to now.
Santions have started to bite. Consumer spending, although not publihed officially, is down 25% in the past 9 months and continues to fall. Retailers tell me that that the trend is continuing as the Russian consumer becomes more averse to spending. What has made matters worse is that landords insist on rents being paid in US$. The US Dollar was once the established ‘currency of trade’ but no more. With interest rates at over 8% and fewer dollars around, the rent being paid to landlords for many Russian-based retailers has risen to 50% of total cost, which is unsustainable in the long term.
Expect more Russian withdrawals as sanctions bite further. I am reviewing growth plans for Russia downwards for 2015.