Nike Is Reportedly Leaving Russia After Not Renewing Main Franchise Contract

Nike Is Reportedly Leaving Russia After Not Renewing Main Franchise Contract

Topline

U.S. sporting heavyweight Nike is exiting Russia after suspending operations in March, according to news reports on Wednesday, another symbolic departure of a major American brand as multinational firms including McDonald’s and Starbucks sever ties with Moscow for invading Ukraine.

Key Facts

While Nike temporarily closed most of its Russian stores in early March and withdrew its sponsorship of popular football club Spartak Moscow, a number of independently operated but authorized retail stores have remained open.

Inventive Retail Group (IRG), Nike’s largest franchisee in Russia, said the sportswear brand had suspended shipments and supplies are running low, according to Russia’s Vedomosti paper on Wednesday.

IRG, which operates 37 of Russia’s 56 remaining authorized Nike stores, also said the brand has not renewed its contract or offered them a new one to sign.

The company’s existing agreement with Nike is due to expire on Thursday, Vedomosti said.

Nike and IRG did not immediately respond to Forbes’ request for comment, though a Nike representative told Vedomosti the decision was due to “operational difficulties” of working in Russia.

Advertisement

Key Background

Nike, like many recognizable Western brands, was swift to repudiate Russia over the war in Ukraine. However, it was among a small minority of companies—including Burger King, the Marriott hotel group and British supermarket Marks and Spencer—that struggled to completely extricate themselves from the Russian market due to complex franchise agreements. Three months since Moscow launched the invasion, more companies are transitioning from suspending their Russian operations to leaving the country entirely, including two iconic American brands, McDonald’s and Starbucks, and French carmaker Renault. Russian President Vladimir Putin has threatened to fight back against companies suspending operations or leaving the country and said he will nationalize their assets. Renault marks the first major nationalization of a Western company’s assets after handing its factory over to the city of Moscow, reportedly for a nominal sum of one ruble.

Tangent

British retailer Marks and Spencer, also known as M&S, announced it would fully exit the Russian market on Wednesday over the war. Like Nike, franchise agreements had prevented it from fully leaving Russia. The company said it stopped shipments to Russia on March 3 and has arranged to exit the franchise agreement. The company said it will endure a $38.7 million (£31 million) charge for leaving.

Further Reading

Exodus Of Western Brands From Russia Leaves Putin On An Island (Forbes)

Advertisement

Leave a Reply

Your email address will not be published.