UK business concern grows over damaging trade war with Russia

By Andrea Felsted and Nick Wilson

©Bloomberg

M&S has 41 stores in Russia and it is estimated that about 4 per cent of total sales come from there

High Street retailers are becoming increasingly concerned about the prospect of a damaging trade war between Britain and Russia hurting their sales.

In an escalation of tensions over trade, Russia this week issued a blanket ban on western meat, dairy and other produce, in response to western sanctions over the country’s role in the Ukraine crisis

Mike Shearwood, chief executive of Karen Millen, the fashion chain that is popular in Russia, warned that the ratcheting-up of measures could hurt British store groups.

“The government may impose sanctions believing that they will impact Russia. They will hurt domestic businesses as well. They need to bear that in mind when taking any actions,” said Mr Shearwood.

Karen Millen has 28 stores in Russia, through its franchise partner Centrepoint. It also has eight stores in Ukraine, although one is closed at the moment, because of the conflict there.

Mr Shearwood said the company was in talks with its franchise partner about mitigating the effect of any further sanctions that could have a “detrimental effect” on the business.

Marks and Spencer has 41 stores in Russia, through its franchise partner Fiba, and it is estimated that about 4 per cent of M&S’s total sales come from the country.

M&S said: “We do not sell any food in Russia so there is no impact from the sanctions to our business”.

M&S declined to comment any further, but it is thought to be monitoring the situation carefully with its franchise partner.

Matthew Beesley, head of global equities at Henderson Global Investors, said the issue of sanctions was not a current problem for retailers with Russian exposure, but rather a “problem for tomorrow if we have a ratcheting-up of the pressure in Russia”.

Other British retailers with stores in Russia include DIY chain Kingfisher, which has 20 outlets there. Burberry, the British luxury goods group, has two stores in Moscow.

Both sales within Russia and those to Russians travelling outside of the country, account for a low single-digit percentage of Burberry’s total sales. Debenhams, the department store chain, has one franchised department store in Russia, while WH Smith has four stores in the country.

Fears of a damaging trade war between Russia and the west grew this week as Moscow banned imports of a wide range of agricultural and food products and threatened possible sanctions on aerospace, shipbuilding and auto sectors.

Moscow barred imports of meat, fish, seafood, vegetables, fruit, milk and dairy products from the US, the EU, Australia, Canada and Norway for a year. A wide range of processed foods were also added to the blacklist of prohibited goods.

The Russian government also threatened more counter-sanctions as it sought to punish the EU, the US and its allies for the introduction of sector-wide measures against Russia last month.