Sanctions forces Adidas to close stores in Russia, Tatarstan is in question

Net sales profit has been declining for the last three years, and in 2016 the company even finished with billions in losses

Sanctions forces Adidas to close stores in Russia, Tatarstan is in question Photo: kazantsum.ru

Adidas will close 60 stores in Russia by the end of the year. Since the beginning of 2017, the company has reduced its presence in Russia, Ukraine and Kazakhstan by 100 stores. The closing of stores Adidas Group calls an optimization of underperforming stores, stating that, along with the closing there is also expected an opening of more than 20 new ones. However, the company shows a stable decline in net profit. Tatarstan, apparently, remains an attractive region, but a couple of stores shops are being in question. The buyers say that there are no previous discounts even in discount centers, and the range has become poorer. Read the details in the material of Realnoe Vremya.

Adidas liquidates a fifth of its chain in Russia

The company Adidas has announced the closure of 160 stores in Russia. According to CEO of Adidas Group Kasper Rorsted, at the moment in Russia and CIS countries (Kazakhstan, Ukraine) there have been closed about 100 stores. In general, it is planned to close about 160 stores in 2017, which means another 60 stores in the second half of the year. Today there are slightly more than 800 operating Adidas stores in Russia.

The closure of the stores were explained to Realnoe Vremya solely by a portfolio optimization. Along with the liquidation in 2017, it is planned to open more than 20 new stores and to improve more than 90 profitable and efficient stores.

''Thus, the company continues to invest in its productive locations. Besides, the company continues to invest in the Russian market and sports infrastructure,'' informed to Realnoe Vremya in Adidas Group.

Sanctions and weak ruble

The company's decision to optimize the chain is quite reasonable, given its financial results. Adidas AG, the main legal entity of the company in Russia, according to the system Spark-Interfax, in 2016 received the sales revenue in the amount of 47,3 billion rubles, which is by 0,6 billion more than in 2015.

According to CEO of Adidas Group Kasper Rorsted, at the moment in Russia and CIS countries (Kazakhstan, Ukraine) there have been closed about 100 stores. Photo: Daniel Karmann / DPA / AFP (vedomosti.ru)

However, the profit performance is becoming worse from year to year. In 2012, the profit from sales amounted to 7,6 billion rubles, in 2013 — 6,2 billion rubles, in 2014 – 0,9 billion rubles. In 2015, the company recorded a loss on sales — 472 million rubles. By the end of 2016, the result was even worse — 922 million rubles. Even more pessimistic are the indicators of net profit. They are also becoming worse every year. Adidas first showed a negative result in 2014 in the amount of 120 million rubles. In 2015, the net loss amounted to nearly 1,9 billion rubles, and in 2016 — exceeded 2,2 billion rubles.

The company assured that the sanctions are to blame. ''We expect that the Russian market will continue to decline after four years of sanctions and dependence on oil prices,'' said Rorsted to RBC.

Аdidas in Tatarstan: is a closure expected?

Whether the optimization will be in Tatarstan, the press service of Adidas did not clarify to Realnoe Vremya. ''The information about the company's plans, in particular, a closure of shops or expanding its presence in specific regions, is currently not disclosed,'' commented Adidas Group.

Today in Tatarstan Adidas is present in Naberezhnye Chelny and Nizhnekamsk (one store in each city), but the largest representation is in Kazan — seven stores, three of which are discount centres.

In the discount centre Adidas in the central universal shop the information about the closure on 9 September has been confirmed, however, according to the workers, only for reconstruction. Photo: kazantsum.ru

The discount center Adidas in XL shopping complex is being under renovation, which began on 27 June, and according to the information on the official website of the company, is to be completed on 8 August, but today the store is closed. Employees of other stores in the chain said that the opening is expected any day now. In the discount center Adidas in the central universal shop the information about the closure on 9 September has been confirmed, however, according to the workers, only for reconstruction. Whether the reconstruction will actually take place or the store is expecting a complete closure — it is unknown. In the shopping center Frant, where there is another discount centre, as well as in other stores, employees do not know anything about a closure.

''I thought for Kazan this store would be enough, but the sales started to increase''

One of the first Adidas stores in Kazan and the first discount center opened in the shopping centre XL more than 10 years ago. The shop rented an area of over 1,000 square meters, the cost of one square meter was $500 per year. Former Director of XL shopping centre Leonid Rakhimov tells about a tenant with warmth.

According to Rakhimov, they had a verbal agreement not to open other discount centers in Kazan, but Adidas business here went up quickly, and in a short time there were opened two more outlets.

''I thought for Kazan this store would be enough, but an increase in sales started, and on this wave, they opened a few more stores. Now, apparently, there is a recession, so they decided to optimize. This is a normal situation, everything is logical — in the mountain, from the mountain,'' says Leonid Rakhimov.

Consumer demand in Adidas in XL was comparable with the demand in Sportmaster. Looking at the competitor, the company decided to open a store of discount format, says Mr Rakhimov.

Now regular customers of Adidas are discussing on forums and social networks that the latest changes are not for the better: supposedly the company has ceased to indulge with discounts, even at discount centres, and the goods for many winter sports disappeared from its range.

By Darya Turtseva, Dmitry Semyagin