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US fashion brand Guess re-acquires Russian business

Published: May 30, 2023
Author: Fashion Value Chain

In an unprecedented transaction for the Russian fashion business, American fashion brand Guess has re-acquired its interest from its Russian partner.

Following the US Treasury Department’s approval of the transaction, the clothes maker and retailer purportedly acquired its 30 per cent stake back from local partner Vyacheslav Shikulov for € 8 million (US $ 8.5 million) and integrated all of its operations in Russia.

The parties had agreed to a ‘put option’ deal at the end of 2015, which gave Shikulov the right to sell his 30 per cent ownership in a local company and required the American company to buy it out by 31st December 2025. Shikulov exercised the option in November 2022, and Guess then submitted a buyback request to the US Department of the Treasury’s Office of Foreign Assets Control (OFAC).

The US clothing giant’s action is unusual given the state of the market, according to specialists in the field, who noted that the great majority of foreign businesses leaving Russia are looking to sell their assets to domestic buyers. They said that the deal might be a reflection of the retailer’s worries about keeping up its operations in Russia.

In terms of losses, Japanese casual wear retailer Uniqlo chose to sell the majority of its locations in Russia earlier this month (May 2023) after suffering multi-million-dollar losses. H&M, a Swedish clothing company, suffered losses of approximately US $ 363 million last year, while Inditex, a Spanish apparel giant that owns brands including Zara, Bershka, and Massimo Dutti, suffered losses of over US $ 300 million. While luxury Italian store Moncler and French rival Hermes collectively lost over US $ 200 million, French athletic goods company Decathlon lost about US $ 140 million.

In the instance of Zara, Inditex sold 245 stores in Russia and withdrew from the market. The Daher Group, a major clothing retailer based in Dubai, bought the business. The Russian market will no longer carry the Zara, Bershka, or Massimo Dutti brands; instead, Maag, Dub, Ecru, and Vilet will take their place.

However, the supply networks and design processes used to create these new brands will remain the same: With European designers retained to maintain a consistent look, Inditex supply chains are headquartered in nations like Bangladesh, India, and other locations.

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