The Spanish fashion group Inditex has managed to sell its Russian business. Behind the investor is the owner of one of the largest shopping centers in the world.
Russia’s Industry and Trade Ministry announced on Wednesday that the Office for Monitoring Foreign Investments has given the green light to a transaction that will allow Inditex to buy 100 percent of Novaya Moda – Inditex’s Russian division – from Fashion and More Management DMCC for sale. The buyer comes from the United Arab Emirates, one of the so-called “friend countries” of Russia.
The price of the transaction was not disclosed. As a result of the decision, some stores are likely to reopen soon under new names such as Maag, Dub, Ecru or Vilet. The openings are planned between April and May 2023.
This is confirmed by several videos on social media that have been circulating in Russian media since early April. For example, the videos show converted Zara stores in Moscow that now bear the Maag name, Russian media outlet RBC reported. The media also reported that the new brands’ collections have already arrived in Russia.
The new face of Inditex in Russia
After the Russian invasion of Ukraine, after which the war began on February 24, 2022, Inditex temporarily closed more than 500 stores in the country. More than a week later, the Spanish multinational announced its withdrawal from the country.
It is not easy for a company to shut down all of its operations in a given market as this means shutting down part of its corporate structure.
In this case, it means that Inditex is withdrawing from one of its largest markets, where it has previously operated with an omnichannel structure consisting of web shops of its various fashion chains and a network of physical stores with more than 500 points of sale.
Inditex is not only the second largest fashion chain in Russia in terms of the number of its stores. The presence in the Russian Federation also far exceeds that of its competitors. Around 8.5 percent of annual sales were generated here.
Where a door closes, a window opens
At the end of October 2022, Inditex announced that it had approved the sale of Novaya Moda JSC to investment company Folge Group.
The Spanish company assured that the terms of the deal would separate the Inditex group from the investor’s activities. However, it also said that it is leaving some leeway for Inditex to resume operations should the international context permit it to resume operations in the future, while examining the possibility of franchising its brands to the Darum Group.
A deal that has been awaiting approval since October Inditex indicated at the time that it wanted the deal to preserve “a significant portion” of jobs in Russia.
That decision has hung in limbo ever since, awaiting approval from the agency responsible for deals with companies from so-called “unfriendly” countries – those countries that have imposed sanctions on Russia.
Who is the new investor?
The investment company Folge Group is the owner of one of the largest shopping centers in the world: Dubai Mall. Furthermore, via one of its subsidiaries, the Lebanese group Azadea, the Darum Group is in charge of franchising the brands of the Inditex Group in Algeria, Bahrain, Qatar and Oman. In turn, she is responsible for the franchising of other international brands such as Adidas, Calzedonia, Mango and Urban Outfitters. In total, the company has more than 37 brands in its portfolio in the Middle East and Africa. In total, the company owns more than 700 stores in 13 countries.
Fashion and More Management DMCC was registered with Dubai Multi Commodities Center (DMCC) on January 25th. Its licensor is Hassan Ghaleb Darum, one of the shareholders of Azadea, which was founded in 1978 by his brother Wassim Vom.
Inditex had a total of 527 stores in the Russian Federation as of October 31, 2021, including 106 Bershka stores, 87 Pull&Bear stores, 86 Zara stores, 76 Stradivarius stores, 63 Oysho stores, 53 Massimo Dutti stores, 44 Zara stores Home shops and 12 Uterqüe shops. By the end of 2021, however, that number would drop to 515 stores.
While this number is far below the 1,319 stores the company has in Spain, it is significantly higher than in other markets such as Mexico (409 stores), Italy (345 stores), or Germany (115 stores).
According to RBC, Inditex has so far spent 231 million euros on maintaining its Russian operations, including staff costs and rent. Smaller importers and online retailers have helped keep the Inditex brands alive in Russia during this period.
This translated and edited article previously appeared on FashionUnited.es.