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Nike not renewing franchise agreements in Russia - newspaper

Stock Markets May 25, 2022 11:37AM ET
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2/2 © Reuters. A customer is reflected in a shop window decorated with Nike store logo at the outlet village Belaya Dacha outside Moscow, Russia, April 23, 2016. REUTERS/Grigory Dukor 2/2

(Reuters) -U.S. sportswear maker Nike (NYSE:NKE) has not renewed agreements with its largest franchisee in Russia, the Vedomosti daily reported on Wednesday, marking the latest exit by a major U.S. brand since Russian forces entered Ukraine in February.

On Monday, Starbucks Corp (NASDAQ:SBUX) said it was pulling out of Russia and McDonald's (NYSE:MCD) trademark "Golden Arches" were lowered near Moscow, following the sale of its burger chain to a licensee.

Nike said on March 3 it would temporarily suspend operations at all its Nike-owned and -operated stores in Russia in response to Moscow's actions in Ukraine and has said that those still open are operated by independent partners.

Inventive Retail Group (IRG), which operates 37 Nike-branded stores in Russia through its subsidiary Up And Run, said there had been a shortage of goods since Nike halted shipments.

"In the current realities we cannot continue to support the operation of mono-branded Nike stores and will be forced to close them," said IRG PR Director Ludmila Semushkina.

IRG President Tikhon Smykov told employees that the company's franchise agreement would not be renewed, in a letter seen by the Vedomosti newspaper.

"We started a joint business in 2012, we lovingly built up the best chain of stores in the country and ended up 10 years later in a situation where that business cannot exist," Smykov wrote.

Nike did not immediately respond to a request for comment.

RETURN OF SHUTTLE TRADERS?

Russians at Nike's flagship central Moscow store had mixed reactions.

Pavel, a Moscow resident, predicted the return of "shuttle traders", people who would sell goods brought from abroad during the latter days of the Soviet Union and its aftermath.

"I don't think there will be import substitution," said another Muscovite, Andrei. "We don't have opportunities for this in our country. I think there will be a shortage, like in the 80s or the start of the 90s."

Meanwhile Alexander, another resident, said Nike's exit was not important as plenty of brands remained.

Vedomosti cited data from Rospatent, Russia's patent office, as saying that franchise agreements with Up And Run and two other franchisees expire on May 26.

Reuters could not immediately verify that information.

Nike has made other efforts to distance itself from Russia, pulling its kit sponsorship for Spartak Moscow, one of Russia's most popular football clubs, which subsequently axed its second-tier team, citing financial difficulties.

"God willing, we will have local producers the same level as Nike," said Moscow resident Konstantin. "It might be not too soon, but I think it will happen, God willing."

Nike not renewing franchise agreements in Russia - newspaper
 

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