Under Armour closing Russian stores
today Oct 22, 2019
American sportswear company Under Armour is reportedly already in the process of shuttering its brick-and-mortar stores in Russia, which have been run through a franchise deal with Moscow-based Vostok Invest LLC since 2017.
According to a report published by Russian business daily Vedomosti, Under Armour is planning to close all of its locations in the country in the near future.
Responding to information from multiple sources, including two real estate consultants and two top managers of Moscow shopping malls, Vedomosti contacted the 10 Russian Under Armour stores listed on the American sportswear brand’s website and found that four had already closed, while a further three were preparing to shut within the week.
This means that, theoretically, only three of Under Armour’s stores in the country – the brand’s locations in Moscow malls Europeisky, Mega Belaya Dacha and Aviapark – will remain open past this week.
When contacted by Vedomosti, Under Armour confirmed the closure of its stores in Russia.
“The limited number of Under Armor stores that a third party developed in Russia have recently been closed,” said the retailer. “There are no changes in the company's intentions to expand the brand's presence in Russia and its role as a strategic long-term driver of business growth in the regions of Europe, the Middle East and Africa (EMEA).”
Vedomosti’s sources claim that the closures are a result of Vostok Invest’s mismanagement, with problems being highlighted with the stores’ assortment and stock.
Speaking of a particular Under Armour location in a large Moscow mall, one source claimed that its product rotation was out of sync with the seasons, offering summer goods in winter, a problem that was further compounded by the limited size range of the products that were available.
When Vostok Invest brought Under Armour’s first monobrand store to Russia, it had big plans for the retailer. At one point, the company ran 16 locations in the country and in 2018 its revenues totaled 1.17 billion rubles (approximately $18.3 million), according to estimates from Infoline Analytics CEO Mikhail Burmistrov, quoted by Vedomosti.
In Burmistrov’s opinion, Vostok Invest’s push for growth was too aggressive, which led to problems as the company had to face up to high rents and changes in consumer behavior, with an increasing number of shoppers in Russia shifting their apparel and footwear purchasing online.
The company also faced stiff competition from international rivals Adidas and Nike, who managed to achieve greater cost effectiveness with their operations on the market.
Due to the combination of these factors, Burmistrov claims that the company had accumulated a year-to-date loss of 1 billion rubles ($15.37 million) by the end of the second quarter of 2019.
“The development was running on borrowed funds,” he told Vedomosti. “Vostok Invest could not keep control of its costs or afford to make rent payments on time – this has led to the closure of all of its stores.”
Vedomosti’s sources were also able to provide information on the company that might be taking over Under Armour’s operations in Russia, claiming that negotiations are already taking place between the US brand and footwear retailer The Zenden Group.
Although Zenden’s owner Andrei Pavlov acknowledged that his company had advised Under Armour about “operational issues,” Vedomosti could not confirm whether or not talks are underway about a possible partnership between the two companies.
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