"The Exodus of Luxury Brands from Russia: A Deep Dive into the Retail Shift"

In the wake of the large-scale invasion of Ukraine by Russia, international luxury brands that initially paused their operations in the Russian Federation have begun a widespread closure of their stores. This development is highlighted by the Russian publication "Kommersant," which reported the closure of three Moscow boutiques by Prada, including a store in GUM. By the beginning of 2024, the brand was left with only six sales points in Russia.

Italian luxury giant Fendi has opted out of leasing three premises in Moscow and plans to terminate its lease agreement for a boutique in TSUM from August 1st. Similarly, the Russian representation of Chanel, which had 17 boutiques primarily in Moscow before the war, has started to terminate its boutique lease agreements.

Last year, Swatch Group, encompassing brands like Breguet, Harry Winston, Omega, and Rado, terminated lease agreements for 15 of its stores in Moscow, Saint Petersburg, and other cities. According to the financial reports of "Swatch Group Rus," the company has 13 remaining locations in Russia.

These brands halted shipments to the country following the EU and US embargoes on the importation of clothing, footwear, and accessories over $300 and €300 per item into Russia.

After the onset of the invasion of Ukraine, 27% of foreign luxury retailers suspended their operations in Russia, according to IBC Real Estate. However, they continued to occupy spaces in key shopping corridors and malls. Most of these brands belong to large groups like LVMH (Christian Dior, Givenchy, Bvlgari), Kering (Alexander McQueen, Balenciaga), and Richemont (Cartier, Chloe, Piaget).

Industry insiders note that luxury representatives held out, hoping for a change in the geopolitical situation, but continuously investing in non-operational stores became untenable.

Consequently, in March 2024, a store of the Chinese premium brand Ellassay opened in the place of Prada's boutique in GUM. Bork, an electronics store, will replace Fendi in Sotovy Lane. Additionally, the Russian brand Oskelly will take Versace's place, and 12storeez will replace Brunello Cucinelli, according to Ekaterina Nogay, the head of research and analytics at IBC Real Estate.

New tenants, however, cannot offer landlords the rates that luxury brands could afford, leading to landlords' lack of interest in terminating relationships.

Meanwhile, some brands, including Gucci, Van Cleef & Arpels, Hermes, Louis Vuitton, and Dior, still fulfill their lease obligations. Yet, their lease terms are nearing an end, and the future of their operations in Russia remains uncertain.

It is important to note that the French brand Chanel, which decided to remain in Russia after the onset of the full-scale war in Ukraine, eventually found itself forced to cease operations and terminate boutique lease agreements.