Designer labels exempt from EU sanctions but face disruption to shipments and business transactions
Burberry has become the latest luxury brand to temporarily shut its stores in Russia following Moscow’s invasion of its neighbour Ukraine, after similar moves in recent days by Louis Vuitton, Hermès, Kering, Chanel and Prada.
The British fashion brand has three stores in the country, including one run by a franchisee and one in Moscow’s famous Red Square. It had already announced last week that it had halted deliveries to the outlets but confirmed this weekend that it was shutting them for the time being.
Its decision to cease shipments to the country “due to operational challenges” had already effectively shut its online operations across the country. Burberry’s Russian site was still up and running as of Sunday evening, though international orders were likely to be disrupted further by Visa and Mastercard’s decision to pull out of the country, resulting in the majority of foreign transactions being blocked.
Luxury labels have been exempt from the EU’s latest round of sanctions, meaning France and Italy can continue to export luxury goods to Russia without any legal repercussions.
However, doing business and fulfilling orders in the region have become increasingly difficult amid restrictions on payments and transactions.
On Friday LVMH Moët Hennessy Louis Vuitton, owner of brands including Christian Dior, Givenchy and Bulgari, said it was shuttering its 124 boutiques in Russia from Sunday, while Kering, which owns Gucci and Saint Laurent, confirmed it would close its two shops in the country.
Chanel wrote on LinkedIn: “Given our increasing concerns about the current situation, the growing uncertainty and the complexity to operate, Chanel decided to temporarily pause its business in Russia.”
On Saturday Prada confirmed it would follow suit, saying: “Our primary concern is for all colleagues and their families affected by the tragedy in Ukraine, and we will continue to support them.”
Giorgio Armani addressed the war directly on the catwalk, with its fashion show in Milan last week held in silence in solidarity with Ukraine. However, the company has yet to confirm whether it has shut or suspended its operations within Russia in line with some of its rivals.
The increasing operational and reputational risks of trading in the Russian market, plus the danger that sanctions could widen, have weighed heavily on stocks across the luxury sector.
Burberry shares have fallen more than 20% since 23 February, the day before Russia officially invaded Ukraine. Its stock price has dropped from £20.63 to £16.41.
Shares in LVMH have shed about 13% of their value over the same period, dropping from €6.65 (£5.50) to €5.77.