By COLLEEN BARRY, AP Business Writer
BRESCIA, Italy (AP) — Boxed fine Italian knitwear bound for retailers in Moscow, St. Petersburg and Kursk are stacked in a Lombardy warehouse awaiting shipment. Although not subject to sanctions to punish Russia for invading Ukraine, the garments may not be shipped soon.
Late payments from Russian retailers who ordered the garments are piling up due to restrictions linked to the banking sector, putting pressure on small fashion producers such as D. Exterior, a high-end knitwear company with 50 workers in the northern city of Brescia.
“This is very painful. I have €2 million worth of merchandise in the warehouse, and if they can’t afford it, I’ll be on my knees,” said D. Exterior owner Nadia Zanola, inspecting the warehouse of the knitwear company she founded in 1997. . created by her parents in 1952.
Italy is the world’s largest producer of luxury goods, producing 40% of high-end clothing, footwear and accessories. While Russia generates only about 3% of Italy’s 97 billion euro ($101 billion) luxury Italian in annual revenue, it is a significant part of the business for some of the 80,000 small and medium-sized businesses that make up the column. backbone of Italian fashion, according to industry officials. .
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“We are talking about eliminating 80% to 100% of the income of these companies,” said Fabio Pietrella, president of the Confartigianato federation of fashion artisans.
Shoe-producing districts in the Marche and Veneto regions, and knitwear manufacturers in Umbria and Emilia-Romagna have become particularly dependent on Russia.
“These are districts that connect the supply chain, and if it’s disrupted, it hurts not just the business that goes out of business, but an entire system that helps make this country an economic powerhouse,” Pietrella said.
The Italian fashion world is best known for luxury houses like Gucci, Versace and Armani, who present their menswear collections in Milan this week. And some of the biggest names appear on a list compiled by Yale University professor Jeffrey Sonnenberg of the top companies doing business in Russia since the war in Ukraine began.
“There are companies that continued to sell to Nazi Germany after the outbreak of World War II; we don’t celebrate them for that,” Sonnenberg said, calling any company that continues to do business in Russia today “greedy.”
He also stressed that fashion companies have no reason to make humanitarian appeals to circumvent sanctions, voluntary or not, as has been the case with agricultural and pharmaceutical companies.
Among those receiving a failing grade from Sonnenberg is Italy’s Benetton, which in a statement condemned the war but said it would continue its business activities in Russia, including long-standing trade and logistics partnerships and a network of stores supporting 600 families. .
Meanwhile, the French conglomerate LVMH temporarily closed 124 stores in Russia, while continuing to pay its 3,500 employees in Russia. The Spanish group Inditex, owner of the fast fashion chain Zara, also temporarily closed 502 stores in Russia, as well as its online sales, which represents 8.5% of the group’s pre-tax profit.
Pietrella fears a kind of Russia-phobia is taking hold that demonizes entrepreneurs for trying to maintain ties to a longer-term vision.
He called criticism of some 40 shoemakers from the Marche region on Italy’s Adriatic coast for traveling to Russia for a trade fair during the war a “witch hunt.”
EU sanctions against Russia tightened after the Ukraine invasion, setting a wholesale cap of €300 for each item shipped, taking super-luxury items out of circulation but still targeting upper-middle class or wealthy Russians. .
“Without a doubt, we as a fashion federation have expressed our extreme concern about the aggression in Ukraine,” Pietrella said. “From an ethical point of view, it is out of the question. But we have to think about our companies. Ethics is one thing. The market is another. The workers of a company are paid by the market, not by ethics”.
He said the 300-euro cap on sales was a tactic by European politicians that, on paper, allows trade with Russia despite the accompanying bureaucratic and financial hurdles, while shielding governments from having to provide bailout funds to the industry. He also dismissed the government’s suggestions as too simplistic to find alternative markets to Russia.
“If there was another market, we would already be there,” Pietrella said.
In D. Abroad, the exposure to Russia grew gradually over the years and now represents between 35% and 40% of the revenues that reached 22 million euros before the pandemic, a flow that is also under a new pressure from higher energy and raw material costs.
The company was already delivering its summer collection and taking orders for winter when Russia invaded on February 24. In March, Russian retailers were having trouble making payments.
Not only is Zanola stuck with some 4,000 spring and summer garments that it has little hope of shipping to Russian customers, it said it was contractually obligated to keep producing the winter orders, risking €100,000 in labor costs. and materials if they cannot be shipped. .
Over the years, his Russian clients have proven to be ideal clients, Zanola said. Not only do they pay on time, but they appreciate the workmanship in D. Exterior’s knitwear creations.
After working so hard to build his Russian customer base, he hates giving it up and doesn’t see a quick long-term replacement.
“If Russia were Putin, I wouldn’t go there. But since Russia is not just Putin, one hopes that the poor Russians will manage to rise up,” she said.
AP reporter Ciaran Giles contributed from Madrid.
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