Nov 29, 2015
Finland's Stockmann exits Russian department store business
Nov 29, 2015
Loss-making Finnish retailer Stockmann is pulling out of Russia by selling its seven department stores there to a local franchisee of Britain's Debenhams for 5 million euros ($5.3 mln), it said on Friday.
It follows other Finnish firms that have been reducing exposure to Russia where business has been hit by the Ukraine crisis, international sanctions, a devalued rouble and economic recession. News of Stockmann's exit sent its shares up 12 percent in early Helsinki trade.
The company, which has also been hurt by recession in Finland and customers shifting from upscale department stores to online shopping, has already closed its fashion stores in Russia and had previously said it planned to close three department stores but keep four running.
"The deal offers Stockmann a good getaway from the difficult Russian market, although the price is nominal. Closing down stores would have been a long and more expensive process," Inderes Equity Research said in a note to investors.
The deal does not include real estate as Stockmann only owns one of the stores, which it will hold on to but sell the operations of all seven stores, allowing it to exit long-term lease agreements at six stores.
The sale comprises five department stores in the Moscow area, one in St Petersburg and one in Ekaterinburg. Last year, those stores generated combined total sales of 240 million euros with an operating loss of 26 million euros, and euro-denominated sales have fallen further this year.
Stockmann said on Friday it would book a non-recurring cost of 75 million euros from the sale of the department stores, but the divestment would improve its profitability from next year.
Russia is one of Finland's main trading partners and many other Finnish companies have been hit by the economic slowdown in Russia.
Construction group YIT, tyre maker Nokian Renkaat and paint maker Tikkurila have issued profit warnings due to weakness in Russia.
Retail and wholesale drug company Oriola-KD sold its Russian business to a local player, while media group Sanoma has tried to sell its stake in a Russian publisher.
$1 = 0.9415 euros
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