MOSCOW — Although they’re attracting ever more customers at home and abroad, Russian designers are not immune to the effects of the global financial crisis.

This story first appeared in the November 4, 2008 issue of WWD. Subscribe Today.

At Moscow’s two fashion weeks, which run consecutively and conclude today, designers and executives voiced concern about falling profits and demand in a country that international luxury brands long have touted as a key growth market, along with China and India.

“The crisis is already having an effect,” said designer Konstantin Gayday, known as Russia’s Philip Treacy for his exotic hats. “The buyers at stores in Moscow have already told us that they’re buying less than usual — around 35 percent less — because there’s less demand.”

Still, others argue that, while Russia’s designer-enamored superrich might lose money in the financial crisis, they’ll remain wealthy enough to splurge on outfits.

The two competing fashion weeks have a limited international profile, though they receive extensive coverage — and high-profile patronage — at home. At the show of Valentin Yudashkin, a stalwart from the Soviet era, guests included Svetlana Medvedeva, the wife of Russian President Dmitry Medvedev, as well as the powerful mayor of Moscow, Yury Luzhkov.

After years when they were considered the poor relations of their Western counterparts, Russian designers are now firmly in favor among the country’s elite, and are picking up laurels abroad. Alexander Terexov, for example, shows in New York and is due to open a store there, while designers including Igor Chapurin, Denis Simachev and Alena Akhmadullina have made a mark in European fashion capitals and have boutiques in Moscow.

Still, the latest Russian fashion weeks come at a difficult time. Russian stocks have fallen steadily since May after foreign investors became jittery about government interference in the economy. Those problems were intensified by the global credit crunch and Russia’s August war with Georgia.

“The Russian markets are down 70-odd percent,” said James Beadle, chief investment strategist at Pilgrim Asset Management in Moscow. “When you look at developed markets, they’re really not quite that bad.”

So far, there have been no major casualties in clothing retail, but there’s a widespread feeling that belts have to be tightened.

“The biggest blow will be felt at the beginning of next season,” said Polina Kitsenko, head of Podium, a chain of multibrand luxury boutiques. “We’ve only bought what we can sell. We’re being sensible about our purchases.”

Designers, too, are thinking strategically. “We’ll produce only a very basic, commercial summer collection of items that will definitely be sold,” said Gayday.

Akhmadullina has lowered turnover predictions for her new boutique in the Russian capital, while a spokesman for Simachev said the company expects to see a downturn early next year.

The gloom, while pervasive, is not overwhelming, however. Russia’s economy is bolstered by foreign currency reserves of around $500 billion and significant oil and gas deposits, and few doubt rich Russians will stop spending, even if their wallets do become lighter.

“If you had $50 million and you’ve got $15 million left, you’ll still drink expensive whiskey and Champagne and smoke expensive cigarettes, and you won’t stop buying dresses for your wife as long as they don’t cost more than 35,000 euros [or $44,590 at current exchange],” said businessman Andrei Fomin.

Svetlana Bondarchuk, a society figure and editor of Russian Hello, agreed. “Rich women will learn to measure their spending a little, but they’re not going to stop,” she said.

Some experts even see the crisis as an opportunity for the Russian fashion industry, at least in the middle and lower segments. As the ruble becomes weaker against the dollar, foreign clothes will become increasingly expensive, providing what could be an opening for homegrown producers.

“In this kind of situation, an internal market will develop, because everything that’s made domestically will be cheaper,” said Alexander Dostman, head of fashion week in Moscow. “There are lower taxes, no import duties.”

And there could be a further beneficial effect: As overleveraged oligarchs in the natural resources sector suffer, Dostman added, clothing may seem like an increasingly attractive investment.

“The crisis has shown big businessmen that it’s better not to be involved in natural resources….We’re on the threshold of a time when businessmen invest serious money in clothing and it becomes a proper business.”

As the Russian fashion industry contemplates this new threat, old criticisms have resurfaced — namely, that fashion week organizers aren’t doing enough to publicize Russian design abroad. Though there were 52 shows at fashion week in Moscow and around 65 are scheduled for Russian Fashion Week, the vast majority of participants are from Russia. As in recent years, there were few foreign buyers or journalists.

“It’s not an event where people come from all over the place,” said Khalid Bazid, head of the Caftan Fashion Week in Casablanca, Morocco, who traveled to Moscow for inspiration. “Maybe it will improve in the next two, three, four years, but at the moment, there’s a feeling that it’s too Russian.”

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