S Group puts Russia on hold

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S Group is putting plans on hold to establish more hypermarkets in Russia due to the Ukraine crisis, its chief executive Taavi Heikkila told Reuters on Monday.

Cooperative S Group operates 17 Prisma hypermarkets and stores in St Petersburg. It had been targeting a total of about 30 outlets as it sought growth.

But the Ukraine crisis and Russia’s economic slowdown have prompted the retailer to re-evaluate its expansion plans.

S Group CEO Taavi Heikkila said it had two new stores in the process of opening in the city this year but that would be all for now.

“If it were not for the problems stemming from the Ukraine crisis, I believe we would keep on establishing about three new stores per year in St Petersburg,” he told Reuters in an interview.

“Of course we are looking for possible store locations, but no decisions on new stores will be made before the situation clears up.”

The hold-up follows a similar announcement from the CEO of Stockmann, who told Reuters in April the firm was freezing its plans to open more department stores in Russian cities.

S Group’s Heikkila said Prisma sales in St Petersburg were still growing even in euro-denominated terms. He estimated Russian sales would grow this year to 280 million euros ($368 million) from 250 million in 2013, helped by increased demand and an expanded store chain.

“Like-for-like sales will also be up, some 16 percent in roubles and a few percent when translated to euros,” Heikkila said

He was surprised at how little Moscow’s embargo on Western food imports had affected selection so farm, showing a picture of filled store shelves.

Heikkila said Prisma’s suppliers’ stockpiles of previously imported goods had held up so far but that it was now seeking replacements. Prisma imports some 30 percent of the products at its Russian stores from Finland and sees the quality of Finnish food quality as a major competitive advantage.

Heikkila said the company continued to target sales of 1 billion euros from stores and hotels in Russia and the Baltic countries by 2016.

S Group’s operations in Finland, the Baltics and Russia include groceries, hypermarkets, hotels, restaurants and a bank, and last year it had total sales of about 11 billion euros. In Finland, S-Group has a 40 percent market share in groceries.