From Hermès to Ikea: the brands suspend their activity in Russia
PARIS – The world’s top luxury brands said on Friday they planned to temporarily close stores and suspend business operations in Russia.
Bag maker Birkin Hermès and owner of Cartier Richemont were the first companies to announce such initiatives, followed by LVMH, Kering and Chanel.
Doing business in Russia has become complex since Russia’s invasion of Ukraine, which prompted the United States, Britain and the European Union to impose sweeping sanctions.
“Given our growing concerns about the current situation, the increasing uncertainty and the complexity to operate, Chanel has decided to temporarily suspend its activities in Russia,” the French luxury fashion house said in a statement. LinkedIn Publish.
Luxury giant LVMH, which owns brands such as Christian Dior, Givenchy, Kenzo, TAG Heuer and Bulgari, among others, will close its 124 stores in Russia from Sunday but will continue to pay the salaries of its 3,500 employees in the country. , said a spokesperson. told Reuters.
French multinational Kering, whose brands include brands such as Gucci, Saint Laurent, Bottega Veneta and Boucheron, among others, has two stores and 180 employees, which the company will continue to support.
While affluent Russians are big consumers of luxury goods, analysts say the proportion of luxury sales generated by Russian nationals is low compared to the industry’s main growth drivers, China and the United States. .
Richemont, which also owns Dunhill, Jaeger-LeCoultre, Montblanc, Piaget and Van Cleef & Arpels among others, has a dozen stores of its own, mainly in Moscow. He said in a statement that he suspended business activities in Russia on March 3 after halting operations in Ukraine on February 24, the day Russia launched its invasion.
Hermes, which has three stores in Moscow, had planned to open an outlet in St. Petersburg later this year.
Investment bank Jefferies estimates that Russians account for about $9 billion in annual luxury goods sales, or about 6% of Chinese spending and 14% of US luxury goods spending.
Swiss watchmaker Swatch Group, which owns high-end watch and jewelry brands including Harry Winston, said it would continue operations in Russia but was suspending exports “due to the overall difficult situation”.
L’Oreal, LVMH and Kering have all pledged financial support to help Ukrainian refugees and Richemont announced on Friday that it was launching a “significant donation” to Doctors Without Borders.
IKEA CLOSES RUSSIAN STORES
Sneaker maker Nike and home furnishing company IKEA closed stores in Russia on Thursday as trade restrictions and supply constraints added to political pressure for companies to cease operations in Russia due to its invasion of Ukraine.
French bank Societe Generale said it was scrambling to reduce its risks in Russia, fearing a tit-for-tat response from Moscow to Western sanctions, as more companies from vodka maker Diageo to Toyota, suspended their activities in the country.
World-famous companies including Apple, Ford and Shell condemned Russia’s attack, but some of Thursday’s announcements were more practical, focusing on supplies and sanctions as shipping routes closed and governments banned exports to Russia.
Boeing Chief Executive David Calhoun, in a memo to staff, acknowledged the violence in Ukraine but avoided the policy.
“Going forward, Boeing will continue to follow the lead of the U.S. government and strictly adhere to announced export controls and restrictions governing work in Russia,” he said in the view note. by Reuters, which describes the suspension of work in Russia. and Ukraine.
Brazilian aircraft maker Embraer has teamed up with Airbus and Boeing to halt parts deliveries to Russian airlines.
Furniture retailer IKEA said it would close outlets in Russia and Belarus, its Russian ally, affecting 15,000 workers, and described its closures in apolitical terms.
“The war has both a huge human impact and is causing severe disruption to the supply chain and business conditions, which is why business groups have decided to temporarily suspend IKEA’s operations in Russia,” IKEA said in a statement.
Nike, Inc. said it was “deeply troubled by the devastating crisis in Ukraine” and described its store closures as follows: “Given the rapidly changing situation and the increasing challenges of operating our business , Nike will suspend operations in Russia.”
Some companies, including McDonald’s Corp., PepsiCo, have been silent on their plans.
The head of the New York state pension fund said Thursday that they and other companies with large footprints in Russia “need to consider whether doing business in Russia is worth the risk during this extraordinarily volatile time. “.
Corporate actions costs are starting to pile up, with more than $110 billion of exposure to Russia reported by global corporations, banks and investors.
Norway’s $1.3 trillion wealth fund said its Russian assets, worth around $3 billion before the invasion, have now become effectively worthless.
“They are practically written off,” CEO Nicolai Tangen told Reuters.
TJX Cos, Inc. announced on Thursday that it would sell its 25% stake in Russian discount clothing retailer Familia, which cost it $225 million in 2019. Due to a falling ruble and TJX said it may take an impairment charge due to the sale.
RISKS OF SANCTIONS
Highlighting the challenges global businesses face as they comply with sanctions on Russia, Societe Generale said on Thursday it could see an “extreme scenario” where Russia strips the bank of its local operations. The lender has a $20 billion exposure to Russia.
Citigroup Inc. said Wednesday it could face billions of dollars in losses on its exposure to Russia and was looking to exit Russian assets. Bank stocks have been battered in recent days amid fears of possible writedowns and weaker economies.
Western sanctions – including the closure of some Russian banks from the SWIFT global financial network, new export controls and the closure of airspace – have led dozens of global companies to suspend operations in the country, hammered the ruble and forced the central bank to raise interest rates.
Spanish fashion retailer Mango announced on Thursday that it was temporarily closing its stores and online sales site in Russia, and spirits company Diageo, maker of Smirnoff vodka and Guinness, said it had suspended exports to Ukraine and Russia. Intel and Cisco said they have stopped sales in Russia.
Accenture said it was ending its Russian operations, which had nearly 2,300 employees.
Britain announced on Thursday that it would ban Russian companies from the insurance market in London, the world’s largest center for commercial and specialist insurance.
Hundreds of Russian soldiers and Ukrainian civilians have been killed and more than a million people have fled Ukraine in the week since President Vladimir Putin ordered the attack.
Russia calls its actions in Ukraine a “special operation” which it says is not designed to occupy territory but to destroy the military capabilities of its southern neighbor and capture what it sees as dangerous nationalists.
With a shortage of components, more automakers are shutting down production at their factories in Russia, including Russia’s largest automaker, Avtovaz, controlled by France’s Renault.
Nissan Motor Co. said on Thursday it had suspended vehicle exports to Russia, while Japanese counterpart Toyota said it would halt production at its Russian plant from Friday and halt vehicle exports to the country indefinitely.
Car supplier Magna said it was shutting down six factories in Russia.
The world’s largest shipping companies, MSC and Maersk, have suspended container shipping to and from Russia.
Japan Airlines and ANA Holdings, which normally use Russian airspace for their flights in Europe, announced on Thursday that they would cancel all flights to and from Europe. — Reuters