The impacts of geopolitical tensions on brand and tanneries

The impacts of geopolitical tensions on brand and tanneries

The repercussions of the pandemic in China, the war in Ukraine and the strengthening of the US Dollar. The effects of the geopolitical tensions, joined by the increased electric and gas prices, arrive straight to the heart of businesses. Large groups feel it, as show H&M and Nike. Chinese tanneries also suffer and as a consequence, its chain also feels it.

Geopolitical tensions in China

According to theSauerReport, Chinese tanneries worked at full regime up until Chinese New Years (February 2022). Then, due to Zero-Covid policies and consequent lockdowns, “many tanneries remained closed for up to a month after the vacation for the celebration”. Then, production progressed slowly, all while costs increased. Tanners have also been facing the raising value of the USD against their local currency.

Good for exporting, but not for those that import raw hides and chemicals. As a consequence, operators prefer buying goods with euros or other more stable currencies, as the entire country is facing difficulties tied to these shifts. China, for example, is a country that is no longer a reference point for Nike. During the July-September period, the sales made by the brand in China decreased 16% compared to the same period of the previous year. It’s partially due to the shutdown of stores, but also because of the nationalistic sentiment that Chinese consumers are showing.

H&M leaves Russia

Yet, it’s even worse for H&M. During the 3rd quarter of 2022, the company recorded heavy losses (and -89% profits) due to the decision to suspend and then close down its operations in Russia. “This decision has had a significant effect on sales and profitability”, confirmed CEO Helena HelmerssonAccording to the Financial Times, H&M closed 185 stores and stopped selling goods in Russia, Belarus and Ukraine. Russia was the 6th largest market before the war, accounting for 4% of the group’s sales. To safeguard profits, the Swedish brand has implemented an economic plan that will allow it to save 180 million euro per year.

Photo from The Moscow Times

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