MILAN — Just how much can the fashion industry do to show its support to Ukraine as the war continues into its second week?
Designers from Giorgio Armani to Demna Gvasalia have been speaking up against the war; protesters bearing Ukrainian flags flanked Milan Fashion Week showgoers, and last week, several international brands and luxury fashion groups, from LVMH and Kering to Prada, Hermès and Moncler, announced they were temporarily pausing their commercial activities and shuttering their stores in Russia as a sign of protest against the country’s invasion of Ukraine. Donations by the brands and the fashion associations have been made to organizations helping Ukrainian refugees, such as the Red Cross and the United Nations High Commissioner for Refugees (UNHCR).
However, some observers doubt the feasibility of taking additional and concrete steps, at least for the time being.
“We are currently living through a war in the heart of Europe. We strongly condemn it and we are close to the population involved in this tremendous situation,” said Italy’s Camera della Moda in a statement issued to comment on the fashion retail situation in Russia. It went on to say that “the temporary closure of the retail stores in Russia is not contemplated by the regulations on sanctions currently in force in Europe, it is a voluntary decision that has been made by many national and international brands that have a direct retail distribution organization. However, we recall that many brands sell their collections in Russia through distributors or dealers and therefore cannot, including from a contractual point of view, close the sales areas in the season, as they already delivered the spring/summer collection in the past few months.”
The statement underscored that the Camera’s “commitment today is aimed at being close to all those who are suffering and this is why we have joined the UNHCR at its side in fund-raising to support the refugees with concrete aid for the people and families forced to flee within the national boundaries or to neighboring countries.”
Speaking from Kyiv, Lidia Vynogradna, a top fashion and retail industry manager, said she was aware that several fashion brands had announced they were closing their stores in Russia, but contended that was not enough. “We hope the fashion industry will react very seriously. I feel [brands] prefer to sit and wait to see what happens.” Since many brands work with wholesalers in Russia, Vynogradna believes they are “two-faced,” resenting that oligarchs can still buy clothes “on Ukrainian blood.”
She said she was not running away from the city. “It’s very bad in North and Eastern Ukraine — reduced to ashes — but nothing is working here either. There are a few food stores and maybe a pharmacy here and there, nothing else is operating. Nobody is thinking about retail, collections are in warehouses. Some retailers have sent warm outerwear and garments for the army and for refugees, but we need military support.”
Vynogradna also lamented how “many people in the West rely on government decisions without taking concrete action.”
Olga Peredenko, a buyer for a fashion store in Kyiv, said she fully understands Vynogradna’s “more drastic” stance, as someone who is living under the bombs and wants to see “anything done to stop the horror,” but she also believes “nobody wants to interrupt working relationships that have been cemented for years.”
Suspending business in Russia “was a political gesture to show solidarity with the Ukrainian people,” but she considers the sanctions on gas and oil as the real leverage. “The Russian population has been brainwashed for years by the media, with inventions about the Ukrainians being Nazis or gearing up to have its own atomic bomb, which is absurd and groundless. Ukraine is a peaceful and democratic country. But the world is changing and Ukraine is only the first step. Putin felt he had room to move, with a weaker NATO and countries in disagreement.”
However, “the Russians are used to certain services and if they are left without them, they will start asking themselves what is happening,” contended Peredenko. As for the branded garments and accessories, “the merchandise is already in Russia,” and she imagines “the stores will empty their warehouses and sell online.”
One Moscow-based retailer who asked to speak on condition of anonymity, believes that while the luxury stores are indeed closed, many commercial activities continue behind the scenes. “I don’t understand why thousands of employees should be punished, they are not out there in camouflage shooting anyone,” he said.
A representative for the giant Bosco di Ciliegi group said “relations with luxury brands are excellent, they have spanned for years and years,” maintaining they will not be wiped out on this occasion. The buying for fall 2022 men’s and women’s collections has been made and he explained that brands have put on standby their activities and temporarily closed their stores following a decision made by their European head offices, “but they are not leaving the Russian market,” citing, among other obligations, “contractual rent deals.” The stores in Moscow, while not open to the public, are lit up “with beautiful windows.”
Bosco di Ciliegi is a brand franchisee but also operates the Gum luxury mall. “As retailers, we continue to work with everyone and we have received the summer merchandise. We are a business, we buy and sell clothes. We can’t change things, and we are not participating in the war. We buy and sell clothes, and we are hoping for a better tomorrow.”
Royal Bank of Canada’s analyst Richard Chamberlain in his report on Monday on European General Retail, stated that “the Russo/Ukrainian War is adding to inflationary pressures which were already building for consumers. We look at direct and indirect exposures and have cut our PBT forecasts for several retailers, on average by 5 to 10 percent. As long as the war continues to escalate, discounters should continue to be most resilient, but we are now seeing value emerging for investors with duration, particularly for share gainers with strong balance sheets and cashflow, like JD and DNLM.”
Chamberlain indicated that Inditex and H&M have the highest exposure to Russia, at around 8.5 percent and 4 percent of group operating profit, while Kingfisher has exposure to Poland, around 9 percent of group EBIT. Inditex has paused its operations in the Russian Federation, while H&M, Asos and M&S’ Turkish franchisee have also suspended shipments to Russia.
This story was reported by WWD and originally appeared on WWD.com.