French retailer Leroy Merlin says to quit Russia

French DIY retailer Leroy Merlin said Friday it would exit Russia, ending an 18-year presence that came under intense scrutiny after President Vladimir Putin's army invaded Ukraine last year.

Unlike western companies that hurried to disengage from Russia after the attack, Leroy Merlin defiantly resisted calls to leave the country, saying it owed it to customers to keep them supplied and to local staff to keep them in work.

Russia is Leroy Merlin's biggest foreign market with 113 stores, and contributes around 20 percent to the company's overall revenues.

But Ukraine heaped scorn on the retailer for the stance, accusing it of sponsoring Russia's war effort.

Leroy Merlin's parent company, Adeo, said it would transfer control of Leroy Merlin to local management in Russia, where it is among the biggest foreign employers.

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Adeo said the move "should preserve the jobs of the 45,000 employees and ensure that the company's activity remains at the service" of the population.

"This process is the result of work initiated several months ago in compliance with international regulations," it said, adding that the transaction is subject to approval of Russian authorities.

'Waiting for months'

"We don't know what the local authorities will say to us," French local daily La Voix du Nord quoted an unnamed management source at Leroy Merlin as saying Friday.

"Other companies like Danone or Schneider have asked for a similar transfer of business control and they've been waiting for months for a response."

A slew of foreign firms closed up shop in Russia last year in the wake of the invasion of Ukraine and subsequent Western sanctions against Moscow.

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But the Mulliez family, which owns Leroy Merlin and other major French retailers including supermarket chain Auchan and the Decathlon sports shop network, stayed put.

Adeo did say last year that it would suspend new investments in the country.

But it also warned that any outright departure from existing commitments would expose it to the risk of "expropriation" by Russian authorities.

Ukrainian President Volodymyr Zelensky called out Auchan and Leroy Merlin in a speech in Paris last year, saying they "must stop sponsoring the Russian war machine".

In February of this year, Ukrainian Foreign Minister Dmytro Kuleba accused Auchan of being a "weapon of Russian aggression" after media reports said its shops had been used to supply goods to the Russian army.

The reports said employees at Auchan in Russia had collected store goods worth two million rubles ($27,000), including woollen socks and gas bottles, which were sent to soldiers marked as humanitarian aid.

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The company said it was "very surprised" by the allegations.

Around 500 French companies had operations in Russia before the war, making them collectively the biggest foreign employers in the country with 160,000 staff, according to the French economy ministry.

'A gift'

But bluechip companies such as Renault have followed major international peers such as Apple and McDonald's by selling their local operations.

The Mulliez family company, based in the industrial northern town of Roubaix, argued that Auchan was remaining in order to sell "essential food items" to Russian consumers.

Ukraine's government and many campaigners believe Western companies have a moral imperative to quit the country given Putin's war of aggression.

Despite some highly public departures, only a small number of Western companies actually deserted Russia last year, according to a Swiss study published in January.

Researchers at the University of St Gallen and at the IMD institute in Lausanne said that less than 10 percent of EU and G7 companies with Russian subsidiaries had divested them.

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The experience of some western companies shows that fears of major pullout losses can be justified.

French bank Societe Generale had to book a charge of more than three billion euros ($3.2 billion) stemming from its decision to spin off its Russian retail bank Rosbank.

Source: AFP