Business

Zara returns to Ukraine following two-year closure

Decision to reopen stores by Spanish owner Inditex reflects tentative normality in some big cities

Inditex, Zara’s Spanish owner, has told local landlords that in early April it will begin reopening its shops in Ukraine

Fri Mar 1 2024 - 07:43

Zara is preparing to reopen the stores in Ukraine that it slammed shut when war broke out, a landmark moment underscoring the fragile new normality of life in several cities despite the conflict with Russia. Inditex, Zara’s Spanish owner, has told local landlords that in early April it will begin reopening its shops in Ukraine, where their near two-year closure has made them black spots in otherwise bustling shopping centres.

The Spanish retailer, the world’s biggest fashion group by sales, is the most important global retailer to return to Ukraine, where its outlets were once the prime attraction in many malls. But it is also one of the last.

Retailers, restaurants and bars began to gradually reopen their doors in the spring of 2022. H&M, which had eight shops in Ukraine before the war, resumed its operations in November 2023.

Greenpoint, a Polish fashion retailer, announced last October that Ukraine would receive its first investment outside its home country. It plans to open 20 stores in Kyiv and some cities in the west of Ukraine.

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Inditex plans to reopen 50 of its 80-plus stores in the country, the company told the Financial Times. Its decision follows months in which it has been peppered with questions from the Ukrainian media and the retail industry about when it will reopen.

Although life in Kyiv can appear normal to visitors, with shoppers queueing to buy dresses and its bars often packed, many Ukrainians are grappling with financial troubles and mental health issues linked to the war.

Missile attacks vary in frequency, with some occurring several days in a row and others after lulls of a month, but air raid sirens sound regularly and the possibility of someone or something being hit is a daily reality.

According to a study published last year by the Retail Association of Ukraine, revenue at retail chains dropped from $37 billion before the war in 2021 to $30 billion in 2022 even with inflation running at 26 per cent.

“The occupation of large areas, looting, the shelling of peaceful cities, constant air raid alarms and blackouts have hit retailers hard. Nevertheless, even in the most difficult conditions, retailers managed to adapt,” the trade association said.

Inditex closed its 84 stores in Ukraine — which included the Zara, Pull & Bear, Massimo Dutti and Bershka brands — on February 24, 2022, the day of Russia’s full-scale invasion. Since then it has ceased to ship merchandise to the country but has continued to pay taxes and the wages of its 1,000 Ukrainian employees, although most have been at home with no work to do. Inditex maintained its rental contracts with landlords during the store closures, but has not disclosed on what terms.

The Spanish group, which has roughly 5,700 stores in more than 90 countries worldwide, will reopen gradually, beginning with 20 stores, including three Zara outlets, in Kyiv shopping centres.

The countrywide total will eventually rise to 50, but Inditex could not say how long the process would take.

The company stressed that Inditex would prioritise the safety of employees and customers and adapt its plans to market circumstances. Some Ukrainian staff have already been sent to Poland for training in preparation for their return to work.

The 34 shops that will remain closed are in parts of south and east Ukraine directly affected by the war, where the Ukrainian government has prohibited commercial operations.

Inditex has left Russia, once its second biggest market by store numbers after Spain, by selling roughly half of its 500-odd shops to the Daher Group of the United Arab Emirates and closing the rest. It has, however, retained the option to return to Russia if “the situation changed”.

Additional reporting by Raphael Minder in Warsaw

Copyright The Financial Times Limited 2024

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