It’s official: Inditex is out of Russia. But maybe not for good.
The world’s biggest apparel retailer by revenue has sold its business in the Russian Federation to the Emirati conglomerate Daher Group, whose high-street Azadea retail brand sells fashion labels including Mango, Juicy Couture, Fila and Missguided. This means all Inditex’s operations in Russia—515 stores, to be exact—will be terminated.
In the event Zara’s parent company “considers that new circumstances allow the return of the group’s brand to this market, Inditex and the Daher group have the option of a potential collaboration through a franchise agreement,” the company said in a note to Spain’s National Securities Market Council.
Sales and operations in Russia were originally suspended on March 5 in response to Russia’s invasion of Ukraine, with the “objective to resume operations in Russia and Ukraine as soon as circumstances allow,” Inditex CEO Oscar Garcia Maceiras said during a news conference. “Inditex continues to prioritize its workforce of more than 9,000 people, with whom it is going to develop a special support plan from now on,” the company said. The 85 stores in Ukraine and 13 in Belarus remain suspended.
According to the Spanish retailer, Russia accounted for approximately 8.5 percent of earnings before interest and tax, translating to roughly 1 billion euro, about equivalent in dollars, or 5 percent of total sales. Inditex estimates that the 216 million euro (approximately $218 million) provision included in the first half of 2022 “sufficiently covers the impact of the termination of the group’s business activities in the Russian Federation.”
The total investment in the area is “not financially significant” as all 500-plus locations were leased. Pending government approval, the terms of the transaction should preserve the jobs generated as it includes the transfer of most of the lease contracts related to stores. Ideally, these storefronts will house brands owned by Daher and unrelated to Inditex.
Inditex’s exit follows that of its rival H&M, who left in July, and Nike, who left In June. Other brands such as Levi Strauss, LVMH, Adidas and Gap has suspended their operations but have not yet left Russia for good.