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Fashion retailer H&M joins TJX and others in exiting Russia

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STOCKHOLM, July 18 (Reuters) – H&M (HMb.ST), the world’s second-biggest fashion retailer, said on Monday it would end its Russian business, a move that will cost nearly $200 million and will affect 6,000 employees when it arrives. an increasing number of companies are leaving the country altogether.

The company suspended operations in Russia in early March following Western sanctions against Moscow over its invasion of Ukraine.

Russia was H&M’s sixth largest market and the company was increasing its number of stores there while reducing its physical stores in many other markets.

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“After careful consideration, we consider it impossible, given the current situation, to continue our activities in Russia,” Chief Executive Helena Helmersson said in a statement.

“We are deeply saddened by the impact this will have on our colleagues,” Helmersson said but did not elaborate. A company spokesperson said around 6,000 employees nationwide would be affected.

Shares of H&M were down 0.5% at 12:50 GMT, lagging a 1.4% rise in the Stockholm Stock Exchange’s benchmark index (.OMXS30).

The entire liquidation is expected to cost about 2 billion Swedish crowns ($191.3 million), of which about 1 billion crowns will impact cash flow, H&M said. The full amount will be included as a one-time cost in the third quarter results.

H&M’s logo is seen inside a closed store in Moscow, Russia March 3, 2022. REUTERS/Staff

Russia was one of H&M’s fastest growing markets and one of its most profitable, Richard Chamberlain told RBC Capital Markets, calling the decision to pull out “somewhat inevitable”.

H&M intends to temporarily reopen physical stores in August to sell remaining stock in Russia, a spokesperson said.

The closure will affect the company’s 170 physical stores in the country and its online sales channels, a spokesperson said. H&M leases the stores and operates them directly.

Several other retailers, including Inditex (ITX.MC), Adidas (ADSGn.DE) have halted sales in the country, while US fashion retailer TJX (TJX.N) and Poland’s largest fashion retailer LPP (LPPP .WA) have decided to sell their businesses in Russia. Read more

H&M’s biggest rival, Zara owner Inditex (ITX.MC), told shareholders last week that it would keep operations suspended for the time being. Read more

“We are in contact with all the actors who have been affected by the suspended measure and we are exploring different alternatives… But at the moment there is no decision other than to continue monitoring the situation,” said said Inditex CEO Oscar Garcia Maceiras.

Hit by sanctions and supply chain issues, Russia has legalized so-called parallel imports, which allow retailers to import products from abroad without the permission of the brand owner. Read more

($1 = 10.4543 Swedish crowns)

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Reporting by Anna Ringstrom and Supantha Mukherjee in Stockholm, Marie Mannes in Gdansk; Corina Pons in Madrid; written by Supantha Mukherjee and Gwladys Fouche; edited by Niklas Pollard, Emelia Sithole-Matarise and Susan Fenton

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