MOSCOW — In Eastern Europe, a nascent and previously expanding market for luxury goods firms, it isn’t only Russia that’s suffering.

This story first appeared in the March 25, 2009 issue of WWD. Subscribe Today.

Retailers in countries from the Baltic states to the Ukraine, many of which are reeling from currency devaluations and significant current account deficits, are reporting lower sales.

“The crisis is being felt very strongly here and is affecting absolutely every segment,” said Irma Marcinkiene, a spokeswoman for Apranga, which runs franchises including Emporio Armani, Ermenegildo Zegna and Hugo Boss in cities like Riga, Latvia; Vilnius, Lithuania, and Tallinn, Estonia.

Apranga reported a 27 percent fall in February turnover, to 7.6 million euros, or $10.3 million at current exchange, compared with the previous year. The figures include results from its mass-market brands such as Zara, Mango and Mexx.

In Poland, turnover at Paradise Group, which runs 13 shops including Burberry, Emporio Armani and Kenzo, remained constant at around 10 million euros, or $13.5 million, in 2008, although sales had expanded 20 to 30 percent annually in previous years, said chairman Mariusz Kaczmarczyk.

Eastern Europe is experiencing similar problems as Russia, which early last year was still considered an El Dorado for luxury goods, and enjoyed a boom after the deprivations of the Communist era and the unstable Yeltsin years. But as the financial crisis has taken hold, the closures of a number of boutiques, including Alexander McQueen and Stella McCartney, have been announced.

In Eastern Europe, too, clothing sales have declined along with those countries’ economies, though the impact has so far not been as dramatic. That’s partly because these markets were relatively small to begin with, with no more than a handful of boutiques each. But fashion houses in Milan and Paris, which had banked on the region as a potential growth area, said during the most recent fashion season that there was a noticeable absence of buyers from Eastern European retailers this season.

Ukraine, a formerly Soviet country of 46 million where the standard of living was rising rapidly in recent years, was thought by firms to be a particularly lucrative market, and its capital, Kiev, is now home to brands including Louis Vuitton and Chanel. But Ukraine’s currency, the hryvnia, has plummeted against the dollar, the nation has agreed a $16.4 billion loan from the International Monetary Fund and industrial output has contracted. Brands have not revealed plans to pull out of the country, but tough times are ahead.

“It’s a test that not everyone will pass,” said Oksana Moroz-Hunt, head of the Sanahunt luxury department store in Kiev. “In Ukraine, only the strongest brands will retain their positions.”

Industry experts say newer, trendier labels will be dropped first by shoppers, while more established European brands will suffer the least.

People are trying to get rid of the local currency and invest in something that will last,” said the manager of a store run by a top European label in Kiev who requested anonymity. “That means less clothes, more bags — and more classic bags from permanent collections.”

Retailers in the Baltic nations, which joined the European Union in 2004, were expecting steady growth — until recently.

“I can’t say that nobody is coming into the store, but it’s not like earlier,” said Yelena Batyreva, the manager of a Riga store, Nude, which sells D&G and GF Ferré. “Even those people with money are preferring to shop when the sales are on.”

Independent fashion retailers in Riga are already closing down, Batyreva said.

Retailers in the Baltics speak of a double blow — not only to their bottom lines, but also to the class of consumers who were just beginning to be able to purchase luxury goods, and would have fueled future expansion.

“Customers who weren’t really the established customers of this segment have disappeared,” said Marcinkiene of Apranga.

Euromonitor estimates total expenditure on clothing and footwear in Ukraine will rise slightly in 2009, while in the Baltic nations it will slide a few percent.

Jobs are also at risk. Maria Grapini, head of the Romanian textile association Fepaius, said one-fifth of the workers employed in the country’s textile industry — around 60,000 people — could be made unemployed because of a drop in orders. The region is a key production area for apparel.

Countries toward the center of Europe, such as Poland, Hungary and the Czech Republic, are better positioned for the downturn because their domestic economies are relatively well developed, said Scilla Huang Sun, a luxury brands fund manager at Julius Baer Asset Management in Zurich. Still, currency devaluations — in Hungary, for example, the forint hit a record low against the euro this month — mean some stores are having to raise retail prices.

At the Ermenegildo Zegna store in Budapest, there’s been no fall in turnover, said its manager, Tamas Magyari. But he added that openings on Andrássy út, a street that in recent years has become home to Gucci and Burberry, have temporarily stopped, which he links to the crisis.

For now, some retailers say there’s still cause for optimism.

“Our brand is quite stable in all of these countries,” said Pascal Hyafil, general director of Chanel in Russia. “The demand for our products stays at the same level.”

And in Poland, “we were even thinking that the first two months of the year would be worse than they were,” said Kaczmarczyk of Paradise Group. “It’s still pretty stable. The question is: How long can we maintain that?”