High-street retailers share concerns towards Russia's sanctions

A number of clothing retailers have shared their concern regarding Russia's imposed sanctions escalating into a trade war and having a negative effect on their sales. Last week saw Russian president Vladimir Putin signing a decree to imposed a one year ban on imports of pork, beef, poultry,

milk, cheese, fruits and vegetables from the EU, the US, Canada, Australia and Norway, in response to anti-Russian sanctions imposed by Western countries. Further “protective measures” are thought to be under discussion, which could affect additional industry sectors.

“The government may impose sanctions believing that they will impact Russia. They will hurt domestic businesses as well. They need to bear that in mind when taking any actions,” warned Mike Shearwood, chief executive officer of British fashion label Karen Millen to the Financial Times.

Sanctions "will hurt domestic businesses as well"

The women's wear label currently has 28 stores throughout the country with its franchise partner Centerpoint and 8 stores in the Ukraine. However, one store in the Ukraine has been temporarily shut due to the ongoing conflict, as Karen Millen remains in discussion with Centerpoint about any additional sanctions which may have a “detrimental effect” on the label's trading.

Another UK fashion retailer who has share its worries concerning Russia, is value-fashion chain New Look. The British retailer previously announced that Russia was one of it main focus markets for international expansion, alongside with China, Poland and Germany and aimed to acquire its franchised stores in the country.

However, on Tuesday morning the group's chief executive officer, Anders Kristiansen revealed that New Look had decided to pause its plans for Russia, where it currently has 20 stores, as the country was rapidly becoming a “poor” market for the group due to the political situation. “Russia has been paused because of the situation there. We're not really looking at Russia now but we may do in the future,” said Kristiansen to Retail Week.

Sporting goods and apparel label Adidas previously indicated that increasing friction between Russia and Western Europe was one of the causes that attributed to the profit warning the firm published last month.

Adidas warned that the Ukraine crisis and consequential tensions with Russia, one of its key markets, would affect its business, and slashed its annual net profit forecast in nearly a third, to about 650 million euros, a drop from its previous guidance for between 830-930 million euros. The sporting goods giant also plans to close a number of its 1,000 stores in Russia 2015.

Although some retailers have been voicing concerns about the situation, other retailers seem less cautious about the imposed sanctions. British department store group Marks and Spencer operates 41 stores in Russia via its franchise partner Fiba, with approximately 4 percent of its total profits made in the region. However, M&S does not sell any food in Russia and believes that the sanctions will not affect its business in the country.

Another company who does not seemed worries about any negative impact on business in Spanish conglomerate Inditex. The group recently introduced its renewed low-fashion label Lefties in the country and opened three stores, two on the outskirts of Moscow and a third one in the suburbs of St.Petersburg on August 1. The group currently sells its other eight labels through 400 stores in the country.

Images: New Look and Karen Millen stores in Russia