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ABC News
ABC News
Business
business reporter Emilia Terzon

The multi-trillion-dollar fashion industry is halting sales in Russia, including Australian brands

Many high-end fashion brands have ties to Russia, but some are already pulling out following the Ukraine invasion. (Reuters: Pawel Kopczynski)

With the war in Ukraine rapidly deteriorating, superannuation funds and mining companies have been withdrawing investments from Russia. But there is another $3 trillion global industry facing public pressure too: fashion.

Several of the world's biggest apparel companies have temporarily shuttered shops in Moscow, including Nike, Mango and H&M.

"H&M Group is deeply concerned about the tragic developments in Ukraine and stand with all the people who are suffering," H&M Group said in a statement.

Global fast fashion website Asos is halting online sales and deliveries in Russia as well.

Another US conglomerate, TJX Cos, is divesting its 25 per cent stake in Russian low-cost apparel retailer Familia, which has 400 stores across Russia.

It might take a loss on that, as the value of the Russian currency dives.

Luxury brands favoured by rich oligarchs have also been under pressure to close Russian stores, with Bulgari even telling Bloomberg that it has seen a sales uptick there as locals try to store their wealth in watches and jewellery.

Richemont and LVMH are amongst the biggest luxury corporations that have now announced they are halting operations there.

Does Australian fashion have any ties to Russia?

Like much of the Australian economy, the local fashion industry's exposure to Russia is relatively tiny.

However, there are several well-known names that have previously sold stock to retailers there, including upmarket fashion brand Zimmermann and iconic shoe brands RM Williams and Blundstone.

They therefore have products listed for sale on Russian websites.

The Australian-owned boot brand Blundstone has a distributor in Russia. (Source: Blundstone.Ru)

Blundstone – a wholly owned Australian company based in Tasmania – even has a Russian Instagram account and a local website. That is after it did a distribution deal with a company there some time ago.

Blundstone's joint chief executive Adam Blake told ABC News that the company "does indeed sell a very small number of boots through a distributor in Russia".

"The sales represent something less than 0.1 per cent of our worldwide business, so it is not a market of high priority for us," he said.

"We have a legal contract in place with the distributor so that will influence our thinking on the future arrangements.

"In the short term, we cannot stop the distributor from selling or marketing the product that it has legally acquired.

Zimmermann – a high-end women's fashion label based in Sydney – did not respond to questions about the terms of its arrangements with Russian retailers.

"Given the invasion of Ukraine and the trade sanctions imposed by the international community, Zimmermann has paused sales into Russia until further notice," a spokesperson for the company said.

The Australian-owned fashion brand Zimmermann has clothing for sale on Russian websites. (Source: GrandBoutique.Ru)

Meanwhile, RM Williams told ABC News it had not sold stock to Russian entities since 2019.

"RM Williams is not currently selling products into the Russian Federation, either directly to customers or indirectly through wholesale partners or distributors," a spokesperson for RM Williams said.

The Australian-owned company has also now approached European retailers with a request to not sell its iconic leather boots into Russia.

RM Williams was founded in Australia, but was for many years owned by global luxury company, LVMH.

Last year, it was brought back to Australia as part of a purchase by Tattarang, which is wholly owned by Andrew Forrest.

That is the same Australian mining magnate who has come out saying he will withdraw his planned renewable energy investments in Russia.

"We have been trying to work with Russia for some time, we've made it incredibly clear that you just have no excuse to go and invade another country," he told ABC News last week.

Is there anything to gain from an 'immaterial' fashion ban?

Patty Huntington is an Australian fashion journalist for Harper's Bazaar and the national correspondent for global fashion bible, Women's Wear Daily.

She said some major companies like H&M did have a significant financial interest in Russia, but that for many, divesting there would not actually be an economic hindrance.

"It's not as big [a market] as it was, but it's got a totally bad smell about it. It's an easy thing to cut off, isn't it?" she said.

"It's like someone going to a protest and putting up a plaque."

She says the Australian brands are in a predicament if they face backlash over selling product in Russia, because their stock has already been sold into the market.

Many major luxury brands with stores or consignment retailers in Russia are closing stores. (Kompas: Heru Sri Kumoro)

When it comes to the luxury sector specifically, a new report by Morgan Stanley in response to shareholder concerns noted that the value of the Russian market for high-end brands had been declining and was "today relatively immaterial".

"For groups such as LVMH and Kering, Russians now account for about 1 per cent of worldwide sales," it found.

As the crisis intensified and the rouble dived, there were global reports that some sales were spiking in still-open high-end shops in Russia, as Russians sought to store their wealth in luxury items.

"It goes to show that fashion is not frivolous," Ms Huntington said.

As of just a few days ago, many of the luxury brands were keeping stores open in Russia. However, on the weekend, many relented to public pressure.

Birkin bag maker Hermes and Cartier owner Richemont were the first firms to announce such moves, followed by LVMH, Kering and Chanel.

LVMH's decision will see it close 124 boutiques in Russia, including Bulgari, which made global headlines when its boss claimed sales there were spiking amid the conflict. 

Many of the luxury brands said they would continue to pay store staff wages.

Swiss watchmaker Swatch Group, which owns high-end watches and jewellery labels including Harry Winston, said it would continue its operations in Russia, but was putting exports to the country on hold "because of the overall difficult situation".

"Meanwhile, e-commerce players such as Farfetch, MyTheresa and Net-A-Porter and even DHL and FedEx are also halting shipments to Russia," Ms Huntington said. 

"Which I guess answers the question: why couldn't Russians simply order luxury brands online?

She said the brands would face a bigger dilemma if the instability spread to China, which is now the luxury fashion industry's biggest market.

Investment bank Jefferies estimates that Russians account for around $9 billion in annual luxury sales, which is about 9 per cent of the Chinese market's value.

Economic conditions may make trade difficult anyway

Whether global fashion decides to bow out of Russia completely or not, economic conditions may make the decision for it.

Blundstone's Adam Blake said there were a lot of factors changing rapidly for many manufacturers selling their goods into the market, including access to financial institutions, insurance and shipping.

"Our priority is to continue to assess the situation and work through the issues with our distributor," he said.

"However, it is likely to be a moot point as far as what we might decide to do after that.

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