Half of major Russian retailers potentially face financial losses in the year 2025.
The Retail Apocalypse: Non-Food Retailers in Crisis
It's a tough time for non-food retailers in Russia as they grapple with mounting losses. The Russian Shopping Centers Union (STC) forecasts that around half of the largest retailers might end the year in the red, according to a report in "Kommersant". The gloomy forecast seems pretty realistic given the 30-35% drop in sales reported by many retailers in the first quarter alone.
Other analysts share the same gloom. In the clothing and footwear segment, checks dropped by 12% year-over-year in January-March, with the average check creeping up just 3%, to 3,400 rubles.
STC provides some examples of networks that are likely to face significant losses. For instance, the footwear network Kari may incur a massive net loss of 6.4 billion rubles, significantly worse than the previous year's loss of 329 million rubles. "Sportmaster" may end the year with losses of 12.2 billion rubles, while "Tvoe" and "Podruzhki" are predicted to see their losses increase to 1.4 billion rubles and 1.7 billion rubles, respectively.
Even those who operated at a profit in previous periods might see a decrease in income or join the losing pack. This particularly applies to sellers of clothing, footwear, and home goods. For example, Hoff may incur a loss of 1.3 billion rubles, compared to a profit of 191 million rubles in 2024. Ostin, which earned 2.6 billion rubles last year, may incur a loss of 458 million rubles. Meanwhile, Familia's net profit may decrease from 1.9 billion rubles to a mere 11 million rubles.
The reasons behind the retailers' losses are manifold. One of the main reasons is the decline in the attendance of traditional shopping centers, which fell by 4% year-on-year by the end of the first quarter of 2025.
As for DIY retailers, their business has taken a hit due to the crunch in the construction market. Last year, their results were quite satisfactory; experts even predicted that the volume of the home goods market, including furniture, home and garden products, and repair goods, would reach 8.1 trillion rubles, an 18.8% increase from 2023. But the soaring inflation rates and fragile economy have dampened consumer confidence and spending power.
To make things worse, consumers are adopting a savings-focused approach, leading to reduced spending on non-essential items. This shift has been particularly damaging for non-food retailers, who have seen significant declines in sales. The Russian e-commerce market has been thriving, however, growing from 1.7 trillion to 12.6 trillion rubles over the past five years, with its share in total retail trade increasing from 5% to 23%.
All these factors could lead to large networks closing individual stores, causing an increase in vacant space in shopping centers. But so far, vacancy rates have only increased by 1 percentage point in Moscow's shopping centers, reaching 7.4%. Even the spaces hastily vacated by foreign retailers after 2022 were filled by other players, suggesting that the vacant space in shopping centers would only be enough to accommodate 20% of the foreign brands that previously left the Russian market.
The challenges facing non-food retailers in Russia are numerous, with economic declines, inflation, changed consumer behavior, and structural issues all contributing to the shift from profits to losses. It remains to be seen how these retailers will weather this storm.
The financial struggles of non-food retailers in Russia extend beyond just the retail sector, affecting various businesses like finance and industry, as many retailers grapple with mounting losses and decreased sales. The predicted losses for retailers such as "Sportmaster", "Tvoe", and "Podruzhki" may even reach billions of rubles, leaving an impact on the industry's overall performance. Furthermore, the shift in consumer behavior towards savings and reduced spending on non-essential items due to economic instability has significantly affected retail sales, potentially causing a ripple effect throughout the business world.
