H&M, the second-largest fashion retailer in the world, said on Monday that it has decided to wind down its operations in Russia, joining a growing list of corporations entirely abandoning the country and causing a 1 percent drop in its stock price.
The corporation ceased operations in Russia at the beginning of March as a result of Western sanctions against Moscow for its invasion of Ukraine. Russia was the sixth largest market for H&M, and the business was expanding its shop count there while cutting its store count in many other areas.
“After careful deliberation, we have concluded that, given the current situation, it is untenable for us to continue doing business in Russia,” said CEO Helena Helmersson in a statement.
Helmersson stated, without elaboration, “We are profoundly sorry by the effect this will have on our colleagues.” A corporate spokeswoman stated that around 6,000 employees will be affected.
H&M estimates that the full wind-down will cost around 2 billion Swedish crowns ($191.3 million), of which approximately 1 billion crowns will have an impact on cash flow. The whole sum will be reported as one-time expenses in the third-quarter results.
H&M plans to temporarily reopen physical stores in Russia to liquidate leftover stock.
The closure would impact the company’s 170 physical locations and its online sales platforms, according to a spokeswoman.
Several other shops, notably Inditex (BME:ITX) and Adidas (OTC:ADDYY), have suspended sales in Russia, while U.S. fashion retailer TJX (NYSE:TJX) and Poland’s largest fashion store LPP have opted to sell their companies there.
Inditex, the owner of Zara and H&M’s chief competitor, informed shareholders last week that it would temporarily cease operations.
“We are in communication with all parties affected by the paused action, and we are examining alternate solutions… The only option available at this time is to continue monitoring the situation “said Inditex CEO Oscar Garcia Maceiras.
Affected by sanctions and supply chain concerns, Russia has legalized parallel imports, which allow shops to import goods from outside without the consent of the trademark owner.