Last week the amount of scandalous and positive news from Euroset exceeded the limit.

Last week the company Euroset not only stopped receiving payments from MTS subscribers, but also selling its contracts. Now the two companies are connected only by the debts. Euroset accused MTS of non-fulfillment of obligations connected with the payment of remuneration in accordance with the contract of commercial representation. MTS hasn’t been transferring money to the retailer for already several months and owes more than 740 mln rubles.

At the same time the Euroset shareholders have been considering 5 or 6 candidacies for the president’s position, but the most probable choice is Alexander Malis, the top-manager of Vympelkom, its shareholder. Euroset has been functioning without a president from the end of March, when the shareholders gave a resignation to Sergey Yuzhenko after his 4 months of ruling the company.

In the meantime the Comsumers’ Union addressed Igor Artemyev, the Head of the Federal Antimonopoly Service, with a complaint about the mobile retailer Euroset and mobile operator Vympelkom and asked to issue legal proceedings against them.

By the end of the year Euroset plans to decrease the bank debts more than twice – up to less than $300 mln. Vitaly Podolskiy, the first Finance Vice-President of the company, said that by the end of last year the company’s bank debt came up to about $650 mln, by February it had decreased up to $425 mln, and by the present time it comes up to $400 mln.

Last week the Euroset leaders also openly said about their relations with MTS for the first time. The retailer’s representatives affirm that MTS pushed Euroset and offered the company a contract, which contributed the FAS requirements. At the same time Euroset is still ready to hold on the negotiations. From their side, the MTS representatives think that breaking the relations was caused by Euroset’s non-fulfillment of the contract terms.

In order not to be fully ceased by the crisis, the Siberian department of Euroset is going to sell the contracts of mobile operators not only in stores, but also with the help of mobile counters in the shopping centers and other public places. Till the end of the year the mobile retailer is going to set up to 100 of such selling points.

Till the end of the year Euroset is also going to launch a new format – the multibrand luxury stores. The company is planning to invest not less than $25 mln in opening of 15 stores, and Alfa-bank will be consulting it. The average telephone price will come up to €6 500, including the brands Vertu, GoldVish, Mobiado and Gresso.

MegaFon started implementing the plans of its own retail development. The operator is investing small retailer networks, in return the partners provide selling its contracts at the level of up to 100% of the total volume of their own sales.

MegaFon is planning to invest $17.5 mln in opening of 500 its own mobile stores, 130 of them will be located in St. Petersburg. The operator is going to start up a network of 1500-2000 stores in Russia within only 2 or 3 years. Now Megafon is looking for the premises, and as the company says this will be the places of a step availability with a high passing ability.

From the other side, the mobile retailer Tsifrograd almost finished its business having not managed to close a deal with MegaFon. The major suppliers of mobile phones refused to work with it. The stores have nothing more to sell, and now they are closing.

The major “Power and retail” news is:

Minpromtorg managed to receive a pause in the war for the sales freedom with FAS. The next version of the Trade Law will be discussed in October, 2009. In spite of the Federal Antimonopoly Service’s expectations, during the government meeting last week Victor Khristenko was able to avoid discussing the disagreements on the Trade Law, which, as Minselkhoz and FAS demand, is necessary to be supplemented with the mechanisms of the state price control and with the regulations discriminating the trade networks. The pause in discussing the scandalous law doesn’t suit FAS: the service is ready to treat the networks in the amendments to the antimonopoly law. 
Within the last 6 month number of medicine units in apothecary stores decreased at more than 10%. The retailers are limiting the range of goods in order to survive in the crisis times. In February, 2008 the Russian apothecary stores offered 3850 medicine trade marks, while in Fenruary, 2009 there are only 3420 (i.e. 11.2% less) and the limiting is still going on.

In spite of the crisis, the Russian retail is still developing. However, it mostly happens at the expense of western networks.

The Britain perfume and cosmetics network Bomb Cosmetics is entering the St. Petersburg market. It’s planned to open 3 stores within the whole year. The average size of the stores is 20-25 square meters, and they will be placed in the city trade complexes. The stores of the Bomb natural cosmetics are already functioning in Moscow, Sochi, Kaliningrad, Rostov-on-Don, Omsk and Vladivostok.

The company Carrefour has signed a preliminary lease contract in the trade and entertainment center Europe in Lipetsk. The store in Lipetsk is going to be the third Carrefour object in Russia. It’s planned to open in autumn 2009.

The first Russian store of one of the major furniture and household goods retailer, Kika, is to be opened on April, 23rd at the Novorizhskoe highway in the Moscow region.

Investments in the trade and entertainment center Mega-IKEA in Samara have already twice accessed the planned volume and now came up to 8 billion rubles. This center might already open in mid May, 2009. By this time the Swedish company expects to receive the whole permit documentation for the object. Both the regional government, and the lease companies name May, 10th as a possible date of the center’s opening. According to the observers’ estimates, the threats to close business in Russia helped the Swedish company to optimize the protracted process of negotiations.

The French group Auchan has announced to enter the Tatarstan market. The first network hypermarket may be opened in the Kazan trade center Yuzhniy in already at the end of 2009.

Here are some failures of last week:

The retailers, who were fighting for the right to open their flag stores in Tverskaya street, have cooled off the main trade street in Moscow. The level of spare areas here reached the record-breaking 15.7% during the first quarter of this year. The same situation is in other trade corridors of the capital: about 40 000 square meters are empty within the limits of Sadovoe circle. In spite of the fact that the owners have already decreased the lease price almost twice, the retailers continue to move out: the brokers are sure that by the end of October about a quarter of all trading areas in Yverskaya street will be empty.

The major suppliers stopped shipping the Detskiy Mir stores. The wholesalers explain that the network delays paying for the goods and asks to increase the deferment from 180 calendar days to 180 bank ones. The leaders of Detskiy Mir assert that they themselves are ready to relinquish 250 from about 650 its suppliers in order to optimize the range of goods.

Mosmart has announced the technical default in paying the coupon in obligations (the only rent a 2 billion rubles, 44% of the turnout is at the market) of about 170 mln rubles. If Mosmart doesn’t settle accounts with the suppliers within 7 days, it will allow a real default. The retailer accounts on closing a bargain by transferring minimum 50% of ZAO Mosmart operator’s shares to Sberbank-Capital at the expense of paying the debts to Sberbank, its major creditor. The new shareholder is supposed to help in paying other company’s debts.

Last week the companies X5 Retail Group and Magnit gladdened by their financial reports. Comparing with 2007, the net proceeds of X5 at the basis of consolidation increased at 57% and came up to $8.4 billion. The ration of the net debt to EBITDA decreased to 2.2. The preliminary volume of the net non-audited retail proceeds (excluding VAT) of the Magnit network exceeded 38 168 mln rubles since the beginning of the year, the growth came up to 36.25%.

The Russian System of the Consumer Unions (Tsentrosoyuz) with the help of Sberbank and AFK Sistema is going to produce the largest network of retail stores and surpass Magnit and X5. However, the market participants are skeptical at estimating the project’s viability: the cooperation is uniting small stores from little towns, they have no single distribution center and police of managing the business. The experts think that without this the separated stores cannot become a network.

The 50th hypermarket Karusel started its work in Russia. It was opened on April, 15th in Karl Marks Street in Cheboksary. According to the retailer’s information, during less than a year the number of hypermarkets managed by X5 increased more than three times – from 15 to 50. During this year the company is going to open another 6 stores: in Rostov-on-Don, Samara and Yekaterinburg.

It became known that Igor Yakovlev, the co-owner of Eldorado, the largest network of household appliances and electronics, also owns a part of the business of Sunrise group (about 100 stores of computer techniques, distributor business and other assets). The businessman owns more than 50% of the company managing the Sunrise real estates, which he was going to sell to the Check PPF Group along with Eldorado.

Vadim Stepanov, the owner of the shoe shop network Tervolina, was released from custody. He was accused of stealing a ground area in Odintsovskiy region from the country. This area was estimated at 3 billion rubles. The restraint for the businessman was changed by the Moscow City Court. It was decided that the businessman may be on bail until the investigation process finishes. 

As it became known, Vadim Stepanov was set free on a 10 million rubles bail; moreover, he was warranted by the teachers of the orthodox gymnasium in Sergiev Posad, which is hold by the accused himself, Nikita Mikhalkov, a film director, Yasen Zasurskiy, a president of the journalist faculty of the Moscow State University, and Yuri Bashmet, a viola player.

The digest was prepared by Retailer.RU and was translated by iTrex company. Itrex is a translation bureau. It offers written and oral translation, notary certification and a lot more. Itrex does work with every language: European, Eastern languages and others. Itrex  does work with every topic: technical, legal, financial, business, etc.

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