“ZARA” TRADE NETWORK TEMPORARILY CLOSES ITS SHOPS IN RUSSIA

The COVID-19 infection pandemic is forcing trade network owners to take desperate measures. First of all, it affected the owners of fashion industry outlets, who felt a serious decrease in customer traffic along with the problems of timely delivery of goods from China.

The owners of the “Zara” brand (the managing company of “Zara” CIS JSC) sent the letters to the owners of the rented premises, in which they proposed to share difficult times with them, forcing them to stop working and redefine the terms of the lease agreements.

Chinese factories, making clothes for “Zara”, “Stradivarius”, “Oysho”, “Bershka” and others, have been stopped temporarily, and the new collections are not available.

In addition, purchasing activity has declined significantly. To the current negative market factors, related to the weather conditions (for example, an abnormally warm winter in the European part of Russia), circumstances, caused by the pandemic were added. According to the “Zara CIS”, this can be classified as force majeure.

However, the experts do not recommend violate the contractual obligations, citing force majeure. According to the law, in this case it is also necessary to prove that such failures are caused by these circumstances, and not by other factors.

It is already known that the “Zara” network brands, owned by “Inditex”, are joined by LPP subsidiaries (including the brands of “Reserved”, “Mohito”, “House”, “Cropp” and “Sinsay”), as well as the owners of the “Rive Gauche” and the “Golden Apple”. All of them require a reduction in rent payments, stating about the possible closure of their enterprises.

According to the number of research of the companies that monitor consumer behavior in major Russian cities, the number of customers in shopping centers has already declined during the holidays on February 23 and March 8. For Moscow, the drop in customer traffic in large shopping centers (by 8.9% and 9.7%, respectively) looks very large.

The lessors are unlikely to accept the official recognition of all these circumstances as force majeure, since nobody closed the shopping centers.

The appeals of the trade networks owners are not final as well, since they are most likely to force lessors to meet them and offer any kind of financial easing.

It is difficult to say, whether these will be discounts or other preferential conditions that will allow the large brands not to close their outlets for a long period. The strategy of networks might be an active transfer of the trade to the online format, which does not require rental costs and allows many employees to work without leaving their homes.