Inside days of Vladimir Putin’s 2022 full-blown invasion of Ukraine, Zara proprietor Inditex introduced “the termination” of its Russian operations in what gave the impression to be a clear break from its largest market by shops outdoors Spain.
However the particulars of its exit have left the world’s greatest trend group — whose Bershka, Pull & Bear and Stradivarius manufacturers additionally had a presence within the nation — properly positioned ought to it select to return.
In early 2023 Inditex injected money into its Russian enterprise, now referred to as New Trend, simply earlier than promoting it for a “not important” sum to members of a Lebanese household that runs the Spanish group’s franchise within the Center East, in response to company filings and firm statements.
Alternative manufacturers arrange by the customer are promoting near-identical merchandise to Inditex whereas counting on the identical suppliers and using its former employees, a Monetary Instances investigation has discovered. And underneath the phrases of the deal, Inditex has the appropriate “instantly” and for gratis to transform the deal right into a franchise association underneath which its personal manufacturers would return to its former Russian shops.
“This seems to be the same playbook to different ‘boomerang’ withdrawals . . . or exits the place the groundwork to return when palatable is laid,” mentioned Kristian Lasslett, a professor at Ulster College who has studied western corporations’ departures from Russia.
Inditex instructed the FT it neither participated in its former Russian enterprise nor supported it in any means, and that “the aim of the transaction was to promote our enterprise . . . whereas retaining our choice to re-enter the market via a franchise settlement”.
Inditex was a part of the primary wave of western corporations to cease doing enterprise in Russia following the February 2022 full-blown invasion of Ukraine, suspending operations within the nation 9 days after the assault was launched.
Eight months later it mentioned it will promote the enterprise for an undisclosed quantity to “the Daher Group”, in an announcement that exposed few additional particulars concerning the transaction.
Whereas no entity referred to as the Daher Group exists, Inditex instructed the FT it had used the phrase to point that the customer was “a part of the group of funding corporations belonging to the Daher household” — whose Azadea Group holds the Inditex franchise within the Center East.
The Daher-controlled entity that now owns the Russia operations — an organization referred to as Combined R DMCC whose web site guarantees “continuity of an distinctive trend journey” — was included in September 2022. Quickly afterwards it created new manufacturers that now occupy lots of the 243 Russian shops included within the deal. Former Zara, Pull & Bear, Bershka and Stradivarius retailers at the moment are respectively branded Maag, Dub, Ecru and Vilet.
The brand new proprietor is determined by among the similar corporations because the Spanish group to supply its merchandise, in response to commerce knowledge that exhibits three of Inditex’s primary suppliers had been additionally the highest suppliers for R Combined, a subsidiary of Combined R, in 2023 and 2024.
Inditex mentioned it was regular apply within the business for various retailers to make use of the identical suppliers and that it “actively ensures the full exclusivity for all merchandise bought by its manufacturers”.
Nevertheless, lots of the new Russian manufacturers’ designs bear a robust resemblance to merchandise from Zara and different Inditex manufacturers, photographs from the businesses’ on-line shops present. Inditex mentioned it will not touch upon different manufacturers’ designs.
Combined R insisted it had no ties to Azadea and that its “artistic design and shopping for capabilities are dealt with by an unbiased group in Dubai”. It mentioned Azadea and Combined R DMCC “are completely unbiased entities, with completely different shareholdings and with none type of linked enterprise”.
Company data present Combined R is co-owned by Hassan Ghaleb Daher and Mohamed Ali Ghaleb Daher, two of the 4 brothers who co-own Azadea.
Past the gadgets’ resemblance, Maag’s first social media marketing campaign for the launch of its spring/summer time 2023 assortment was shot on the similar location as a Zara assortment across the similar time. Each had been filmed in Lanzarote by the identical Spanish manufacturing firm, in response to the manufacturers’ Instagram posts. Inditex mentioned Lanzarote “is a standard and frequent vacation spot for trend business picture productions”.
In December 2022, two months after the deal was introduced, Inditex wrote off a Rbs9.1bn mortgage plus curiosity, then value about €120mn, to its Russian enterprise, in response to company filings that present it then injected a complete of Rbs5.7bn, greater than €65mn on the time, into the corporate over the following 4 months — earlier than the deal closed.
Nataliia Rybalko, a researcher on the Kyiv College of Economics who has studied multinational exits from Russia, mentioned she may consider no different examples of a western firm placing cash into the Russian enterprise it was promoting.
“Quite the opposite, when leaving Russia, corporations withdraw as a lot cash as doable earlier than the sale,” she mentioned.
Paul Ostling, former world chief working officer at EY who has beforehand served as audit committee chair for a lot of listed Russian corporations, mentioned that it was “widespread sense, operationally” that “you don’t usually put money into an asset you’re disposing”.
He famous that New Trend’s 2023 monetary statements confirmed Inditex had categorised the asset as non-current, because it was being held on the market when the cash was being injected. “So the query is, why put money into an asset that’s non-current and held on the market?”
Inditex mentioned the enterprise had important working prices however no gross sales, that obligations to “workers, native authorities, landlords and so on . . . wanted to be fulfilled, although the corporate was on the market”, and that injecting capital into the enterprise was according to such a state of affairs.
Between the Russian enterprise’s March 2022 closure and April 2023 sale, it acquired greater than 800 shipments of attire from its Center Japanese potential purchaser, in response to commerce knowledge.
Inditex mentioned it had agreed with the Dahers that New Trend would import merchandise earlier than the sale was finalised “to facilitate the immediate opening of the purchaser’s operations in Russia”.
Whereas Inditex and R-Combined declined to reveal the phrases of the sale or how a lot cash, if any, modified arms, the Spanish group in January 2023 calculated that the Russian enterprise had a “realisable worth” of €183mn.
Requested concerning the proceeds of the sale, Inditex pointed to the €231mn value of terminating its Russia enterprise and mentioned “the income generated from the sale was not important”.
Individuals acquainted with western retailers’ operations in Russia famous that Inditex’s association with the Dahers was uncommon in not containing a standard buyback settlement, which generally permit corporations to repurchase bought entities inside a sure timeframe — and at a sure value.
As a substitute, the so-called Daher group is “obliged” to “instantly” organize a franchise settlement for Inditex in Russia with the transferred shops ought to market circumstances change, in response to disclosed phrases of the deal.
Dozens of Inditex workers — together with designers, model administrators and consumers — relocated to the UAE to work for the so-called Daher group on the brand new enterprise, in response to folks acquainted with the association.
9 Inditex employees moved in 2022 earlier than the deal closed, in response to their LinkedIn pages, with the remainder doing so afterwards, becoming a member of a number of Inditex alumni already employed by the UAE firm. One individual, who was employed by R Combined from Inditex as head of footwear in March 2023, rejoined the Spanish group final month, in response to LinkedIn.
Inditex mentioned it had supplied greater than 800 voluntary leaves of absence in 2024, a determine according to the typical of earlier years, noting that underneath Spanish labour legislation such standing shouldn’t be bestowed by the employer however is “a employee’s proper that employers should grant”.
Not less than one of many Dubai-based holding firm’s workers stays on Inditex’s employees whereas on depart of absence, in response to folks acquainted with the construction of the Inditex-Daher association.
The beforehand unreported particulars of Inditex’s sale of its Russia enterprise recommend the Spanish group is healthier positioned than most western retailers to re-enter the Russian market.
Russian media shops reported this 12 months that Inditex may quickly be returning to the market, amid a broader rapprochement between Moscow and the US, though folks working with western corporations in Russia dismissed such studies as untimely. Inditex declined to touch upon what it described as “deceptive rumours”.
“This appears to be a part of a sample I’ve noticed in another instances the place corporations have left Russia and the property have been put within the identify of those rigorously curated holding corporations within the UAE, the place it’s just about not possible to search out data and they’re due to this fact not possible to scrutinise,” mentioned Lasslett.
“Russia was a vastly worthwhile marketplace for a few of these western corporations comparable to Inditex . . . set-ups of those kind increase the query of how a lot was a real withdrawal and the way a lot is a holding place till they’ll return.”
Inditex mentioned that its monetary statements “reliably, precisely and exactly element the reason of the transaction”. It added that it did “not touch upon opinions, understandings or conclusions that aren’t primarily based on knowledgeable and correct evaluation”.
Further reporting by Chloe Cornish in Dubai
