On March 30, a subcommittee of the government commission for the control of foreign investment in Russia approved a deal for the sale of 100% of the company New Fashion JSC (formerly Zara CIS) by the Spanish clothing retailer Inditex Group. This was announced to RBC by Deputy Minister of Industry and Trade Viktor Evtukhov.
The buyer of Inditex’s Russian business, including Zara stores, was Fashion And More Management DMCC “with an office in one of the friendly countries,” Yevtukhov said, without elaborating on other details. The company with the same name is registered in the free zone of the United Arab Emirates – Dubai Multi Commodities Centre.
The Inditex Group is one of the world’s largest clothing retailers that develops the brands Zara, Pull&Bear, Bershka, Massimo Dutti. In March 2022, the company, amid the start of a Russian military special operation in Ukraine, suspended work and temporarily closed stores in Russia.
According to the Deputy Head of the Ministry of Industry and Trade, Inditex transfers all its trading platforms in Russia to new owners. According to the Deputy Minister, the new owner will open stores under specially created brands MAAG, DUB, ECRU, VILET. “Collections with new tags have already been sewn and brought to Russia. All stores are ready for the opening, which should take place in April-May (2023),” Yevtukhov added. The amount of the transaction was not announced by the ministry.
Earlier, on April 4, a video with MAAG showcases on Kuznetsky Most in Moscow, where a Zara store used to be, appeared on Telegram channels and the media. A store under this brand, according to experts, is also scheduled to open in the Aviapark shopping center.
What we know about the Zara deal
At the end of October 2022, it became known that Inditex agreed to sell New Fashion JSC to the Middle East investment company Daher Group. As specified in the Spanish holding’s 2022 financial statements (.pdf), the agreements between the companies provide that the Spaniards will transfer to the new owner 245 of the 514 stores that the company operated in Russia. The remaining 269 outlets will be closed, the holding company confirmed to El Pais. The terms of the deal also assume that Daher Group will open stores completely unrelated to Inditex Group, but in the event of “new circumstances” allowing Inditex to resume its presence in the Russian market, it will consider franchising its Daher Group brands.
Commenting on the likelihood of a return to the Russian market under such conditions, Inditex CEO Oscar Garcia Maceiras noted that he did not believe that this could happen in the short term.
RBC turned to Inditex in Russia for comment, as well as Azadea Group affiliated with Daher Group.
At the end of March, part of the legal entities that developed Inditex brands in Russia began liquidation, it follows from the SPARK database, in particular, it affected the operating companies of the Oysho and Zara Home networks.
Prior to the completion of the transaction, Inditex allocated €231 million to support the Russian business, including for personnel and rent. Russia accounted for about 8.5% of the group’s global EBITDA. At the end of 2022, EBITDA increased by 20% to €8.6 billion compared to 2021. Net profit of Inditex increased by 27% and reached €4.13 billion. Revenue grew by 17.5% year-on-year, to €32.6 billion.
What is the buyer known for?
Daher Group is considered the owner of one of the largest shopping centers in the world – Dubai Mall. One of its subsidiaries, the Lebanese Azadea Group, owns the franchise of Inditex brands in Algeria, Bahrain, Qatar and Oman. Also among the international brands whose stores are operated by the Daher Group on a franchise basis are Adidas, Calzedonia, Mango, Gap, Tezenis, Urban Outfitters, Reserved and a number of others (in total, according to its own data, the group has more than 37 brands in the Middle East and Africa ). Azadea controls over 700 stores in 13 countries including Algeria, Bahrain, Cyprus, Egypt, Ghana, Jordan, Saudi Arabia, Kenya, Kuwait, Lebanon, Oman, Qatar and the UAE.
Azadea was founded in 1978 by businessman Wassim Daher. Among the shareholders of the company as of 2015 were also his two younger brothers, Hassan and Said. Judging by the business social network LinkedIn, Said Daher is currently the CEO of the company. Previously, Bloomberg estimated the brothers’ fortune in 2015 at least $ 1.4 billion. In subsequent years, they were not mentioned in the list of billionaires of the publication.
What other clothing brands are leaving Russia
After the start of a special military operation in Ukraine, Western companies began to massively curtail business in Russia. Among them were representatives of the largest brands of clothing and footwear – the decision to temporarily close stores and then leave brands from Russia was made not only by the Inditex group, but also by the Swedish H&M and a number of other companies.
Then part of the stores began to gradually return to the market under other names and with new foreign owners. In May, it became known that the Turkish shoe retailer FLO Retailing was negotiating the purchase of Reebok’s business in Russia. Mehmet Ziylan, head of FLO Retailing, spoke about plans to purchase more than 100 brand stores. Now, on the site of Reebok stores, points under the new name Sneaker Box are gradually opening.
Also in May, stores in Russia owned by the Polish LPP SA (which manages clothing brands Reserved, Cropp, House, Mohito and Sinsay) resumed work in a similar way. Stores opened under new names: Reserved became RE, Cropp – CR, Sinsay – SIN, House – XC. In July, it became known that LPP sold the business to FES Retail, registered in the UAE, which owns 95%.
The Spanish retail chain Mango said in June that it would leave Russia, handing over its stores in the country to franchisees. At the end of July, it became known that Turkish Fiba Retail, which developed the British clothing brand Marks & Spencer (M&S) in Russia, could become one of the new Mango franchisees. The British brand itself decided to leave Russia, there were 48 M&S stores in the country.