BY CAROLINE SOKOL

Revenue or Reputation: The Decisions Companies Face as Russia Wages War

04.12.22

Revenue or Reputation: The Decisions Companies Face as Russia Wages War

As Russia continues to invade Ukraine, many fashion companies have chosen to cut ties with Russia as both a protest and a message to the Russian government. However, this decision comes at a cost as some companies are reluctant to break these ties. The reason behind this hesitancy is derived from economic sanctions or supply chain issues, which will ultimately result in a company's inability to maintain sales. During this current global crisis, we are left with the question of whether potential harm to a company's reputation caused by maintenance of a relationship with Russia can outweigh a company's prospective financial loss.
Although many countries do not want to engage in war with Russia, the steps that these companies have taken to demonstrate support of Ukraine has surely gotten Russia's attention. Canada Goose, based in Toronto, Canada, has decided to stop all wholesale and e-commerce sales to Russia. Furthermore, through their Goose Response Program, Canada Goose has pledged to donate $100,000 CAD to the United Nations High Commissioner for Refugees. This was a big financial risk for Canada Goose to make, due to the reduction of its sources of revenue. Adidas has also demonstrated their support for Ukraine, as the company has decided to suspend sales to Russia and its partnership with the Russian Football Union. This was a major decision for Adidas, as they currently have 500 stores in Russia and former Soviet states and thus have estimated a 1% cut in expected revenue growth this fiscal year.
In contrast, Uniqlo's decision to no longer associate with Russia was almost involuntary. Fast Retailing, which is the Japanese clothing company that operates Uniqlo, stated that their stores would continue selling their clothing in Russia. They received a negative response to this statement and consumers took to social media platforms to express their anger, some even claimed they planned to boycott the company. However, one cannot help but wonder: why would a company that prides itself on being the fourth largest retailer in the world not follow the example of other companies that sacrificed their revenue to show support for Ukraine? Uniqlo representatives claimed that they did not want to punish Russian civilians that should not be suffering due to choices made by their leader. The company currently has 50 stores in Russia, which is their largest number of outlets outside of Asia. After facing backlash, Fast Retailing agreed to donate $10 million to the UNHCR and donated 100,000 Uniqlo garments to refugees.
Russia, a country that has developed a large presence in international markets since the Cold War, has once again completely isolated itself. Major businesses that Russia has been dependent on have stopped complying with Russian needs or requirements. For many countries, apprehension to cut ties with Russia goes beyond the fear of developing a bad reputation. Many now face the challenge of physically getting items to Russia and receiving payments. Major shipping companies have stopped shipping to Russia or have limited their shipping abilities. With this, Canada Goose, Adidas, Uniqlo and more are proceeding cautiously to reduce financial loss and brand name damage alongside the sanctions established against Russian financial institutions.




STOCK UPDATES

CANADA GOOSE HOLDINGS INC (NYSE: GOOS)
Share price: 24.25 USD
Market cap: 3.26B CAD

Background: Canada Goose Holdings Inc. is a leading Canadian company known for its high quality winter garments. Starting in Toronto over 60 years ago, the brand has grown into a billion dollar empire supplying the world with its apparel.

Current News: Canada Goose Holdings Inc. has stopped all commerce and sales within Russia as a response to the current global events. Canada Goose has also pledged to donate $100,000 CAD to the United Nations High Commissioner for Refugees. With a reduction in sources of profit, recent moves have been considered risky, yet strategic, in terms of the financial impacts to come.

ADIDAS AG (OTCMKTS: ADDYY)
Share price: 112.30 USD
Market cap: 39.65B EUR

Background: Adidas AG is a global sportswear manufacturer, based in Europe and headquartered in Herzogenaurach, Bavaria, that designs and manufactures shoes, clothing and accessories. Adidas is often characterized alongside its “three stripe logo”, which has become synonymous with the company's brand name over the years.

Current News: In light of the news in Russia and Ukraine, Adidas has decided to suspend all sales and partnerships to Russia. This has resulted in an expected 1% cut in revenue growth this fiscal year.

FAST RETAILING (OTCMKTS: FRCOY)
Share price: 48.54 USD
Market cap: 6.38T JPY

Background: Fast Retailing Co., Ltd. is a Japanese multinational retail company. Its primary subsidiary is Uniqlo, a globally renowned Japanese casual wear designer, manufacturer and retailer.

Current News: Fast Retailing initially claimed that clothing sales within the Russian region would continue despite the global events. After facing backlash from many consumers and social media commenters, Fast Retailing has since changed its path and temporarily suspended its operations in Russia, having an undetermined effect on the profitability of the company this fiscal year.



https://www.businesswire.com/news/home/20220302005810/en/Canada-Goose-Announces-Donation-to-United-Nations-Suspends-Sales-in-Russia/?feedref=JjAwJuNHiystnCoBq_hl-W8j9Oi60kFTomUxRDB8jhCKmhTJD30tv8ISECDd4_2qrCOi9QzgjCezTS3Nw_X6kJUrpSBm-Hav1w-UkdSlG3npKQ3IKnTp9s4aBN89fHaCZzC18GwA9IvHQuvfNZfs7g==
https://torontosun.com/business/money-news/canada-goose-among-global-brands-exiting-russia-over-ukraine-invasion
https://www.nytimes.com/article/russia-invasion-companies.html
https://www.forbes.com/sites/laurendebter/2022/03/03/exodus-of-western-brands-from-russia-leaves-putin-on-an-island/?sh=762d792b1ef7
https://www.cbsnews.com/news/russia-ukraine-uniqlo-closes-stores/
https://fortune.com/2022/03/09/uniqlo-owner-fast-retailing-slammed-decision-stay-russia-boycottuniqlo-movement/