As communicated on 2 March, H&M Group paused all sales in Russia. Now, given what it calls “current operational challenges and an unpredictable future” the company today (18 July) has made the decision to initiate a process of winding down the business in the country.
H&M Group has run operations in Russia since 2009. The retailer says it regrets that the business cannot continue under the current circumstances and that many colleagues are affected as a consequence. The focus now is to ensure a responsible wind down of operations and support all colleagues concerned in the best possible way over the coming months, it adds.
“After careful consideration, we see it as impossible given the current situation to continue our business in Russia. We are deeply saddened about the impact this will have on our colleagues and very grateful for all their hard work and dedication. Furthermore, we wish to thank our customers for their support throughout the years”, says Helena Helmersson, CEO of H&M Group.
As part of the winding down process, the intention is to temporarily reopen physical stores for a limited period of time to sell remaining inventory in Russia. The entire wind-down is expected to lead to costs for the H&M group amounting to a total of about SEK2bn (US$192m), of which approximately SEK1bn will have a cash flow impact.
The full amount will be included as one-time costs in the results for the third quarter 2022. A reversal of the SEK353m in unrealised exchange gains in respect to intragroup receivables in Russian rubles from the second quarter 2022 is included in the one-time cost.
Emily Salter, senior analyst at GlobalData, notes H&M Group has become the second major apparel player to permanently exit Russia, following Nike, Inc, adding “the exit of these key retailers will no doubt inspire others to do the same.”
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She says: “As the conflict draws on, a full exit seems to be the most appropriate action for retailers to take as stores have already been closed for months, so retailers have seen the impact on their sales and they can better protect their reputations.”
Nike, Inc confirmed its decision to leave Russia last month.
Click here for Just Style’s coverage of the Ukraine-Russia crisis and its impact on the global apparel industry.