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Stockmann Sells Its Subsidiary Engaged In The Zara Business In Russia To Inditex And Focuses On The Rapid Expansion Of Its Own Business In Russia. Moscow’s Fourth Stockmann Department Store To Ikea’s Mega Iii Shopping Centre


WEBWIRE

January 31, 2006, Under an agreement signed today, January 31, 2006, Stockmann will sell the entire shares outstanding in its subsidiary ZAO Stockmann-Krasnoselskaya, which is engaged in the Zara business in Russia, to the owner of the Zara brand, Inditex of Spain, and will focus on the rapid expansion of its own business in Russia. The total purchase price is EUR 41.5 million. The capital gain on the sale will improve the Stockmann Group’s earnings significantly in 2006. Stockmann will continue the Zara business in Finland. Under an agreement signed today as well, Stockmann will lease premises for the fourth full-scale Stockmann department store in Moscow at IKEA’s Mega III Shopping Centre, the construction works of which are in progress in Southeast Moscow. The department store is estimated to be completed around the turn of the year 2006-2007.

Stockmann and the Inditex Group of Spain signed an agreement in 2002, on the basis of which Stockmann, under an arrangement extending until 2010, received franchising rights to business operations under the Zara brand in Russia. In rapid succession, Stockmann has opened Zara stores in Moscow, and their operations have got off to a good start. This transaction consists of six Zara stores, all in Moscow. Sales by Stockmann’s Zara stores in Russia were about EUR 46 million in 2005. In step with strong economic growth, the Russian market has become an increasingly interesting environment for retailers. Accordingly, Inditex and Stockmann have reached a joint understanding to terminate their previous contractual arrangements and concentrate on expanding their own operations in Russia. Under an agreement signed today, January 31, 2006, Inditex will purchase the entire shares outstanding in ZAO Stockmann-Krasnoselskaya, which is engaged in the Zara business in Russia, and will take over responsibility for the Zara business in Russia such that the business will be carried on for the account of Inditex from January 1, 2006. The final agreement, the coming into force of which is contingent on approval by the Russian Anti-monopoly Committee, is supposed to be made on May 31, 2006, at the latest.

The purchase price is about EUR 41.5 million including the company debt. The capital gain on the sale will improve the Stockmann Group’s earnings in 2006 significantly. The agreement does not have an effect on Stockmann’s Zara franchising business in Finland, where the company presently operates four stores.

Following this transaction, Stockmann has in Russia three department stores, three speciality stores, seven Seppälä stores and four franchising stores of the Danish Bestseller company. In future Stockmann will concentrate on energetically expanding all these operations. Under the agreement signed today Stockmann will lease premises at the IKEA-owned Mega III Shopping Centre, the construction works on which are in progress in Southeast Moscow, for the fourth full-scale Stockmann department store in Moscow as well as retail space for a Seppälä store and a Bestseller franchising chain store. The project is estimated to be completed and opened for commercial use around the turn of the year 2006-2007. Taking into account all the leased premises, Stockmann’s total investment in the project is about EUR 16 million.

The largest individual project in the pipeline in Russia is for a department store and shopping centre with about 50,000 square metres of retail space in the heart of St Petersburg. It is scheduled for completion in time for the Christmas market in 2008. Stockmann’s Hobby Hall subsidiary, which is engaged in distance retailing, also intends to start operations in the Russian market in 2007.

Further information:
Hannu Penttilä, CEO, Stockmann, tel. +358 9 121 5801
Heikki Väänänen, Vice Executive President, Stockmann, tel. +358 9 121 5230



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