Russian department stores have come a long way in the past few decades and nowadays any visit to Moscow or St Petersburg isn’t complete without popping into a TSUM, a GUM. But maybe, just maybe, from next year, Debenhams might also be a must-visit as the chain has just signed a deal that will dramatically increase its presence in Russia.
Yes, Debenhams – that oh-so-British department store chain – is going for major expansion in Russia on the back of Finnish peer Stockmann’s retreat from Moscow.
The Finnish giant is finished with Russia (excuse the pun) as far as directly operated department stores are concerned and will now focus on Finland and the Baltics, plus its Russian real estate business.
So cue expansion-hungry Debenhams to make a move. In fact, Stockmann is selling its lossmaking Russian department stores business for just €5m to Reviva Holdings Limited, which is the owner of Debruss, the Russian franchisee of Debenhams.
Following the divestment, Stockmann will continue to operate the Nevsky Centre shopping centre in St Petersburg.
Reviva will take over all the stores in seven locations from the beginning of February 2016 and will have the right to use the Stockmann brand in Russia for two years. During that time it plans to gradually transition the stores to the Debenhams brand.
Stockmann has been making losses from the stores for years and Russia’s economic/currency woes have made the situation worse. So why is Debenhams so keen to enter the fray?
Well, Debenhams seems to have ‘thing’ about Russia. It debuted there in 2006 but pulled out again two years later. However, it went back in 2012 with two stores and loudly proclaimed Russia as the place to be that would generate around 20% of its international sales by 2015.
Hmmmm. Hindsight is a wonderful thing so maybe it’s not so bullish now. But Iakov Panchenko, chairman of Reviva, did say: “We are excited and aware of the opportunities and challenges that lay ahead of us in this very dynamic market. Stockmann has not only built a successful brand in Russia but has also assembled an experienced and motivated team to service our customers’ needs.”
Perhaps it makes sense, after all even in a weak market Stockmann’s stores managed revenue of €240m despite losses of €26m. And the five stores in Moscow, one in St Petersburg and one in Ekaterinburg does give Debenhams a ready-made business there from which it can expand when the good times return.