By
Ibukun Ogundare
June 29th, 2023
That H&M is exiting Russia is not a new move, as it represents a general trend in the broader retail and fashion world.
Swedish multinational clothing company H&M Hennes & Mauritz AB (STO: HM-B) has finally made the difficult decision to close down its operation in Russia, months after it suspended operations in the country. The announcement, published on Monday is having its toll on the company’s shares which are changing hands at SEK129.80, down 0.41% at the time of writing.
H&M first suspended its operations in Russia in early March following Moscow’s invasion of Ukraine. The war has taken a massive turnaround for H&M as the country represented one of its largest markets worldwide. Infact, the retailer has been increasing its store count in the country over the past few years, a significant exception as it has been reducing its storefronts in other markets.
“After careful consideration, we see it as impossible given the current situation to continue our business in Russia,” Chief Executive Helena Helmersson said in a statement. “We are deeply saddened about the impact this will have on our colleagues.”
The winding down operations according to the company is projected to cost as much as 2 billion Kronor or ($191.3 million). Of this figure, as much as 1 billion Kronor will have a cash flow impact, and the entire cost will be included as a one-time cost in the financial result for the third quarter.
As part of its plans to close shop in Russia, H&M also plans to temporarily re-open its stores in a bid to sell off its remaining inventories in the country.
H&M Russia Exit – an Industry-Wide Trend
That H&M is exiting Russia is not a new move, as it represents a general trend in the broader retail and fashion world. The company’s major competitors in Europe are also making the move. Spanish retail giant and owner of Zara, Inditex, Industria de Diseno Textil SA (BME: ITX) informed its shareholders that it will be monitoring the situation for a while, but keeping its operations in Russia suspended for the time being.
“We are in contact with all actors that have been affected by the suspended measure and we are exploring different alternatives… But at this moment there is no other decision than to continue to monitor the situation,” said Inditex CEO Oscar Garcia Maceiras.
Off the shores of Europe, fashion brands are also massively pulling out their presence in Russia as Western sanctions broaden. One of the notable fashion brands that have decided to sell its operation in Russia is the American multinational off-price department store corporation, TJX Companies Inc (NYSE: TJX) as well as Poland’s multinational clothing retailer dealing with design, production, and distribution of clothes, LLP SA (WSE: LPP).
Away from fashion and retail stores, prominent companies ranging from energy firms, financial services providers, and even crypto exchanges have pulled out their services from Russia, with McDonald’s Corp (NYSE: MCD) notably selling its Russian business in May.
