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Retailers start warn of business impact from Russian invasion

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Residents stood outside a mall in Kyiv on Tuesday, March 1, 20,22, during an hour of curfew.

Erin Trieb | Bloomberg | Getty Images

Retailers will continue to be concerned about rising inflation and strains in the global supply chain as they work through the next earnings season. Russia’s invasion of Ukraine is another topic that investors and analysts are discussing. which entered its second week on Thursday.

Some retailers stopped their operations temporarily in Russia as a sign of corporate disapproval over the conflict or simply because they are unable continue business with the country’s logistics companies due to the imposed sanctions.

Some of them, like Victoria’s SecretThey warn that the uncertainty caused by war could lead to instability weigh on businessThese figures are likely to be accurate for the entire first quarter of 2019 and beyond.

Chuck Grom, an analyst at Gordon Haskett said that retailers’ biggest concerns will be how long the crisis lasts.

Grom stated that “you have to believe the longer it continues, the more difficult” it becomes. In other words, consumers spend more time becoming absorbed in the current situation.

The retailers are trying to predict future demand and stock shelves without overordering merchandise. As immunity rises and Covid cases decrease, businesses are trying to entice consumers back into their shops. It could be more difficult than it was a year ago when Congress and President Joe Biden approved stimulus payments for families.

Pittsburgh clothing store American Eagle OutfittersThe company said Wednesday it was taking into account the wars between Russia, Ukraine and other countries when forecasting its outlook for 2013. However it declined to give details about the impact on consumer demand if the war had a significant financial effect. American Eagle has no brick-and-mortar stores outside North America and Hong Kong. However, it does ship merchandise to 81 nations.

Michael Mathias the Chief Financial Officer stated that American Eagle was cognizant that there are multiple current factors in play. These include rising inflation and the fact American Eagle is starting to lose the period in which stimulus was given to consumers last spring. There is also continued disruption within the global supply chains, including the war in Ukraine.

“Against this backdrop, we’re taking a cautious view,” Mathias said.

American Eagle said that it expects earnings to decline in the second half of this year relative to the previous-year level. This was due in part to increased freight costs. They are expected to recover in the second half.

Victoria’s Secret, a Russian-based lingerie retailer, made an indirect mention of the conflict when it reported its fourth quarter results. On Wednesday, the company reported on its fiscal fourth quarter results. inflation and “global unrest”That will lead to a difficult environment over the following months. Victoria’s Secret gave a negative outlook on the first quarter. However, it stated that the company believes that the third quarter will bring better results.

Kohl’sMicelle Gass, Chief Executive, was interviewed Tuesday on an earnings conference with analysts about the Ukraine situation and what it could mean for the business of the department store chain.

We are prepared for uncertainty. Gass stated that they had considered this as they guided the year. We’ll keep close by and remain responsive.

Contingency plans are created by retailers to close down stores

This could have a significant impact on American consumers. The burdens of these changes will be greater for companies, including food and auto producers. skyrocketing oil pricesYou can also face supply chain issues. It is common for price increases to be passed onto the customer.

David French (senior vice president for Government Relations at National Retail Federation), the largest retail trade organization, stated, “There are implications to U.S. retailers regarding the higher cost energy because of the disruption of and disruption in oil markets.” Due to the importance of Russia and Ukraine as important agricultural regions, there will be consequences for U.S. retail stores in regards to food prices.

He said that “those are probably the largest first-order consequences” and added that U.S.-based retail outlets have little exposure to Russia or Ukraine. Although he mentioned Ukraine as being an important hub for IT support outsourcing, this could prove to be more problematic if the crisis continues.

French stressed that consumers are shopping like they have confidence even in times of pandemic. (Holiday retail sales rose by 14.1% in 2021 compared to the previous-year level. according to NRF,In spite of inflation, the spread of the omicron variant.

Simeon Siegel from BMO Capital Markets echoed the sentiment. Siegel added, “Setting aside the things it says about humanity as we learned with Covid: People are really good about not letting problems bother them until it knocks on their door.”

Companies have also been quick to voice their opposition to the Kremlin’s invasion of Ukraine.

Ikea, a furniture retailer, announced Thursday that it will close all its Russian stores and stop production. It also plans to halt all imports from and exports to Russia and Belarus.

The war is having a significant human impact as well as causing serious disruptions in supply chains and trading conditions. This is why company groups decided to temporarily suspend Ikea’s operations in Russia. the company said in a statement.

Fast-fashion retailer H&M, coat maker Canada GooseAnd NikeAll three companies have stated that they are also suspending Russian sales. An official statement Nike’s website in RussiaThe sneaker company says it cannot guarantee that product deliveries in Russia are possible at the moment. Unspoken spokesperson did not respond to a request for further comment.

Craig Johnson is the founder of Retail Consulting Group. CGPHe said that he believes retailers or other brands having a presence on the eastern and central European continents will already be developing, if perhaps implementing, contingency strategies.

“Contingency plans are most critical for in-store and back office employees and hours of operations,” Johnson said. But they include plans for cyber and physical security, vendor communications and trimming or delaying merchandise as needed.

The story is still in development. Keep checking back for more updates.

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