Inditex, led by the non-executive president and its executive leadership, confronted a demanding challenge as Marta Ortega and Óscar García Maceiras assumed their duties on April 1. Shortly before, on March 5, in the early days of the war in Ukraine, the Galician multinational announced the closure of more than five hundred of its online stores and physical points in Russia. This decision carried substantial weight because the Russian market ranked as the second most important after Spain, accounting for around 8% of the group’s earnings and employing more than 9,000 people across approximately 515 retail locations.
That is why Russia has been a major issue for Inditex. To safeguard its financial statements, the group took a provision of 216 million euros for losses linked to the suspension of operations in Russia for the current year, which runs from February 1 to January 31 of the following year. Management estimates that the monthly cost of staying out of the market, due to store closures, rent obligations, and payroll, amounts to about 20 million euros.
More than seven months after the initial halt, Russia remains the world’s second-largest market for the company in terms of potential revenue. With stores closed and the multinational facing ongoing payroll obligations to its roughly 9,000 Russian employees, Inditex has been seeking strategic alternatives to defuse the situation. Although public signals point toward an exit from the Russian market, Inditex has continued its operations in Russia with the expectation of resumption after the conflict ends, albeit under a revised framework.
The path forward appears connected to the concerns of the building owners where the group’s stores are located, whom Inditex has not paid in full. One notable case emerged on September 30 in the Arbitration Court of Samara, a major city in Russia’s southwest region.
That owner, managing several shopping centers in Samara, demanded compensation exceeding 8 million euros for damages resulting from the closure of stores, including rent, penalties, and lost earnings. The court upheld the claim, but an appeal was filed, signaling the possibility of reopening Zara outlets. The applicant asserted that the Russian market had not been abandoned while the defendant was pursuing measures to continue business in the Russian Federation, including changes to corporate structure and supply chains to avoid enforcement challenges.
Inditex has stated that, in line with the judicial ruling from September 30, it has not left the Russian market and intends to resume commercial activities there. Yet, the group plans changes in the organizational structure of its subsidiary in Russia to facilitate ongoing operations.
According to a Russian business outlet, Kommersant, there were reports that the company might relocate its Russian assets to partners in a “friendly” country, such as nations in Southeast Asia or the Persian Gulf, to sidestep sanctions and keep activity in Russia intact. The multinational has neither confirmed nor denied these reports. Since the suspension of operations in Russia last March, Inditex has monitored market conditions with a priority on preserving employment levels. In that context, Inditex has been examining various scenarios and engaging in exploratory discussions with interested parties about potential alternatives.
At the end of fiscal 2021, Inditex operated 515 stores in Russia. The majority were Bershka with 106 locations, followed by Zara with 86 stores and Pull&Bear with another 86. Massimo Dutti, Stradivarius, Oysho, and Zara Home operated in the country with 60, 74, 62, and 10 points of sale respectively, illustrating the breadth of the group’s footprint in the Russian market.