California Fashion Brand Ups Russian Investment

American fashion brand Guess has reacquired its 30% stake from its Russian partner Vyacheslav Shikulov, an unusual move for the Russian fashion market. The deal, valued at €8 million (US$8.5 million), has consolidated 100% of Guess's Russian business after receiving approval from the US Treasury Department.

The repurchase comes as a surprise, considering the prevalent trend of Western companies selling their assets to local investors upon exiting Russia, according to reporting by Russian journal Kommersant.

In 2015, Guess and Shikulov signed a 'put option' agreement, which obliged Guess to buy out Shikulov's 30% stake by the end of 2025. Shikulov triggered this option in November 2022, with Guess obtaining the necessary permission from the Office of Foreign Assets Control of the US Department of the Treasury (OFAC).

The decision comes at a time of significant changes in the Russian fashion market, where foreign brands have seen a downturn due to increasing political pressures. Several major companies, including Uniqlo, H&M, Inditex, Decathlon, Moncler, and Hermes, have suffered substantial financial losses in their Russian operations.

Despite these challenges, Guess reported a 24% increase in its Russian revenue in 2022, amounting to 4 billion rubles (US$49.9 million). The company now owns 44 stores across Russia and operates as a distributor for wholesale partners.

Industry experts are speculating on Guess's motivations for this unusual move. One possible scenario is a resale similar to Inditex's approach, which could result in a rebranding of Guess's name and a continued use of its established supply chains under the new venture.

"This is an atypical move for an American company in the current situation," commented Dmitry Gabyshev, Managing Director of Peregrine Capital. "The Russian partner of Guess could have decided not to wait for the put option deadline due to the attractive current assessment of the share or risks for the future work of Guess in the country," he added.

Despite the ongoing uncertainties, Guess remains one of the most recognized American brands in Russia and continues to partner with major online platforms and department stores, maintaining its presence in the Russian market.