MOSCOW British high-end womenswear firm L.K. Bennett said it plans to open five stores in Russia, shrugging off the political and economic challenges of working in a country that's been under Western sanctions for almost three years.
The London-based company, famous for kitten heels, smart dresses and handbags, is owned by private equity firms Phoenix and Sirius. It opened its first shop in a Moscow mall in August, teaming up with Russian fashion firm Easy Fashion Group.
L.K. Bennett, a high street brand favoured by Britain's Duchess of Cambridge, expects to open a second Russian shop later this year and also plans to launch an online store. A further four stores are planned over the next two to three years, the company said.
It joins a growing list of foreign firms tiptoeing back into the Russian market. The economy is still weak and there is no immediate prospect of sanctions being lifted. But Russia still offers strong returns and, three years on from the Ukraine crisis, the fear of doing business in Russia has receded.
"It has huge potential, this market. Moscow is an international city and we trade in most of the major international cities around the world," L.K. Bennett's chief executive Darren Topp told Reuters late on Thursday.
"The sales have been really encouraging over the last few months so, yeah, we're really excited about it," Topp said on the sidelines of the formal opening of the Moscow outlet.
He said the company, founded by Linda Bennett in London in 1990 with the vision of bringing "a bit of Bond Street luxury to the High Street", planned further foreign expansion. It anticipates that in three or four years time half of its sales would be outside Britain, compared with around one quarter now.
EXPANDING MIDDLE CLASS
Russia's economy is set to return to growth this year, driven by an expected recovery in consumer demand and investment combined with low inflation and a steady rouble.
That follows two years of contraction prompted by low oil prices and Western sanctions for Moscow's annexation of Crimea and its support for separatists in eastern Ukraine.
The economy ministry expects 2 percent growth in gross domestic product in 2017, helped by a rebound in oil prices, while the official inflation target for the year is 4 percent, down from 5.4 percent in 2016 and 12.9 percent in 2015.
Before the sanctions, Russian consumption was booming and the middle class expanded and while the economic crisis hurt spending, high-end retailers fared better, partly because wealthier people travelled less and spent more at home.
According to property consultants CBRE, in 2015-2016 a total of 29 new luxury goods stores were opened in Moscow – that is 42 percent more than in 2013-2014.
Russian stocks were among the best performing emerging market indices last year and have touched fresh highs in 2017, buoyed by stronger oil and hopes of sanctions relief.
In another sign that foreign investors are turning positive on Russia, German automaker Daimler (DAIGn.DE) announced last month it would open a plant near Moscow to make Mercedes-Benz cars - its first to produce passenger vehicles in Russia.
Bulgari, the flagship jewellery brand of French luxury group LVMH (LVMH.PA), said last year it planned to grow presence in Russia after rival French luxury group Hermes (HRMS.PA) tripled the selling space of one of its two Moscow shops.
And hypermarket chain Auchan said in December it was stepping up investment in Russia, saying the economy there has largely adapted to sanctions.
"We see it (Russia) as a real opportunity. At the end of the day we're selling clothes, we're not in the politics. That's all we do, we sell clothes and shoes," said Topp.
(Additional reporting by Anastasia Teterevleva in Moscow and James Davey in London; editing by Anna Willard)