The fashion firm Mango has decided to definitively abandon direct sales in Russia, after 23 years present in that market, due to “international geopolitical uncertainty” due to the war in Ukraine, according to group sources. The company has reached an agreement with several local partners to give up its 55 own stores, which will become franchises, and keep the jobs of its 800 employees. In addition, it has made a provision of 20 million euros in its 2022 accounts for the impact of the situation in Russia.
Mango temporarily suspended its operations in that country in March, including the sale on-line. Given the prolongation of the conflict, in the coming months a process will be carried out to transfer the own stores to different franchise partners. The first two outlets will be transferred next week, and there will be another 22 between June and July. There will also be no direct sales online. The staff of its own establishments will be taken over by Mango’s partners, who will continue to buy products from the firm, but they will have to manage the transport to Russia. Franchisees also assume the commitments derived from the rental contracts of the premises. Currently, the firm has 53 franchises in this country, where it landed in 1999.
At the end of 2021, Russia represented 8% of Mango’s net operating income (EBIT) and was among its five largest markets. Since the suspension of operations, Mango has been paying the payroll of its employees. Also in Ukraine, where it closed its 14 stores (both its own and franchises) at the beginning of the Russian invasion, on February 24.
Reopening in Ukraine
The group, owned by businessman Isak Andic, has reopened the doors of nine of these points of sale in Ukraine, four of them its own, and over the coming weeks it will continue to resume operations in the country. “After thoroughly analyzing the current security protocols, we are proceeding with the progressive reopening of its points of sale, attending to the requests of both its franchisees and its direct local teams, accompanying them in the economic and social reactivation of the country”, he explains. the company, which has taken into account “the criteria established by the official authorities for the process of reopening its points of sale, which takes place in areas far from the armed conflict”. Employees who have decided to leave the country have been offered a new job in another destination.
The cessation of operations in Russia has been a setback for Mango, as well as for other Western companies that have followed the same steps, such as its rival Inditex, given that it is a market of considerable dimensions. The firm, present in 110 countries around the world, has set itself the goal of promoting its business in other countries this year, in order to continue growing.
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One of those key places is the United States, where it has just presented an expansion plan to open thirty stores by 2024 (it now has six) with the aim of making this market one of the five main ones for the brand, with an investment that will be around 100 million in three years. Other essential markets are in Europe (Spain, the United Kingdom, Germany and France), where the company believes it has a long way to go to grow, and it also sees India and Canada as fundamental.
Mango returned to profit last year, after a 2020 of losses due to the pandemic. The net result was 67 million, the best since 2014. As of 2016, the company had entered into losses, a path of red numbers from which it managed to get out in 2019 and then fall back again in 2020 due to the blow of the covid . The group’s international activity amounts to 79% of the total and sales on-line has grown significantly and now accounts for 42% of turnover.
