Foreign clothing and footwear chains are closing shop in Ukraine

The jeanswear chain Lee Cooper closed shop in Ukraine, three directors of competing chains and a director of a consulting company, who wished to remain anonymous, told Capital. Lee Cooper closed in the Dream Town shopping center, center’s co-owner Oleksandr Melamud confirmed.

The Lee Cooper chain had a dozen stores in Ukraine, three of which were located in Kyiv. Capital did not manage to get commentary from the company’s office in Ukraine.

Unprofitable business

Lee Cooper is not the only fashion retailer to shut down its business in Ukraine. “The clothing store New Look will be working in our shopping mall until January 1. As far as I know, this chain is leaving the Ukrainian market,” said Director of Sky Mall Olha Tkachenko. Several other retailers confirmed this information. However, General Director of New Look Oleksandr Lysetskiy informed that the chain is not closing shop at the moment, though he refused to comment further. New Look manages six stores. There were seven, but the outlet located in the Donetsk City shopping center closed down three months ago following the combat actions in the east of Ukraine.

Since the start of the year, as Capital earlier reported, the clothing chains Bosco, Esprit, OVS, River Island, s.Oliver and s.Oliver Kids and footwear chain Minelli and others shut down their businesses in Ukraine.

To sell or to close

Closing a store is an extreme measure, says co-owner of Zeebra (Butlers, Six, I am, Glossip, Peacocks chains) Dmytro Yermolenko. “Nobody opens an outlet to close shop later,” he says, adding that the situation in the retail sector is critical. Over nine months clothing and footwear chains registered a decline in sales of 30-50%, depending on the goods offered for sale compared with the same period in 2013. “The number of customers did not decrease, but people are buying less,” adds Tkachenko.

The business could have been sold, but this depends on how long the market will continue to decline,” says Yermolenko. Indeed, it is difficult to make any forecasts at the moment: the further development of business depends on the situation with the military actions in the eastern regions of the country, stabilization of the national currency, etc. That is why businessmen prefer to shut down an unprofitable business, rather than keeping it afloat. As a rule, such decisions are made by Ukrainian entrepreneurs, who acquired a franchise right for the development of a certain brands in Ukraine. Large international chains operating in Ukraine independently, for instance Inditex (Zara, Pull&Bear, Massimo Dutti), LPP (Reserved, Cropp, Mohito, Sinsay), Mango and other have the resources to maintain their business.

Developers will make concessions

It will be difficult for the owners of shopping malls to replace tenants that left, seeing as the majority of retailers have frozen their development plans in Ukraine. The situation may worsen after four new shopping malls open in Kyiv next year, specifically the shopping and entertainment centers Respublika (rented space – 135,000 sq m), Blockbuster Mall (120,000 sq m), Lavina (124,000 sq m) and Retroville (83,000 sq m). “I cannot imagine how these spaces will be occupied,” says Melamud.

Retailers that are not planning to freeze their development are trying to get the most out of the situation. “One of the largest Ukrainian chains is ready to open stores, but at such low rates that we are afraid to announce them to the developer,” says a director of a retail department of a consulting company on condition of anonymity.

Commercial real estate expert Vadym Zinchenko says that at the moment many lessees are looking to get the same conditions as Inditex. One of them is that the developer must offer premises that have already been refurbished at his own expense. The cost of repair is estimated at US $800-1,000 per square meter. However, developers are making concessions to the largest retailers, says Zinchenko. For instance, he says, theoretically LPP, Jysk, MTI (Intertop, Ecco) MD Group (Tommy Hilfiger, G-Star, Gant, Walker), Argo and Sportmaster can expect such concessions.