MOSCOW — The news from Russia hasn’t gotten any better.
Until last year a key potential growth engine for luxury brands, the market has imploded as rapidly as the price of the oil that fueled the country’s wealth. In Moscow, an Alexander McQueen and a Stella McCartney boutique, both of which are franchises run by the same Russian firm, are to close less than 18 months after opening as a result of the crisis, while department stores report plummeting sales. And the prospects for Russian brands, many of which previously had international expansion in their plans, are less certain.
The McCartney and McQueen stores “were both opened practically at the beginning of the financial crisis,” said Lidia Alexandrova, the manager of luxury stores for Russian franchisers Arts Group. “They need an extremely large investment to operate successfully. The owners decided that it makes more commercial sense to rent out the space for other uses.”
The McQueen store opened in September 2007, and the McCartney store in March 2008.
A Manolo Blahnik franchise also recently shut down, although a company spokesman declined to comment on the reason.
Russia’s stock markets and currency have taken a battering as a result of the financial crisis, which has exacerbated the effects of slumping oil and metals prices and a pullout of foreign investment. The government is facing hard realities: Its 2009 budget was based around an estimated oil price of $95 a barrel, though last week Prime Minister Vladimir Putin ordered that the budget assume an oil price of $41 a barrel. Oil prices on Wednesday averaged $42 to $44 a barrel on global exchanges.
The country is not officially in a recession, though GDP forecasts have been slashed. And the government has spent around $200 billion, a third of its reserves, to prevent the ruble from collapsing.
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