Inditex considers divesting Russian business, Zara could continue under new name

Inditex is considering the possibility of selling its business in Russia amid the war in Ukraine, although it could continue to operate in the country with Zara under a new name, while Massimo Dutti, Oysho and Zara Home would leave the Russian market altogether.

According to the Russian daily newspaper Kommersant, the company founded by Amancio Ortega is considering whether to hand over its Russian assets to partners in a "friendly" country, such as in Southeast Asia or the Persian Gulf.

Sources interviewed by the newspaper explained that the handover of Inditex's Russian business to its partners will take anywhere between six months and a year and added that Massimo Dutti, Oysho and Zara Home will leave the Russian market altogether, while the rest of the brands, including Zara, will open under new names and with new collections no earlier than spring 2023.

A similar scenario was previously played out last July by the Polish retailer LPP, with brands such as Reserved, Cropp, Mohito and Sinsay, which divested its shops in the Russian Federation to a company registered in the United Arab Emirates. At the same time, the fashion group's stores continued to operate, but under new names.

In March, days after the war began, Inditex decided to close its 502 shops in Russia, its second largest market after Spain, with more than 9,000 employees, and to suspend online sales in the country as a result of the Russian invasion of Ukraine. Of the 502 stores, 86 were Zara shops.
 
Russia accounts for around 8.5% of the group's global net operating income (EBIT). The profit before tax in the Russian market was €86 million in 2020 (€229 million in 2019), with sales accounting for around 5% of the total, or more than €1 billion.

Inditex stressed at the time that all its shops were operating on a rental basis, so the investment was not relevant from a financial point of view.