Baltika Significantly Reduces Business on Risky Eastern European Markets
As the complex economic and political situation in Ukraine, Belarus, and Russia has caused a significant decrease in sales volumes and solvency of Baltika’s franchise partners on these markets, AS Baltika decided to terminate franchise agreements before the end of their period of validity with Belarusian and Ukrainian partners in the first quarter of this year. Cooperation with Russian franchise partner will continue but on a smaller scale.
The franchise agreement with the Ukrainian partner, Baltika Retail Ukraina Ltd, was signed in 2014, and the franchise agreement with the Belarusian partner, Valanga OOO, in 2013. Ukraine’s unstable economic environment and the announcement of state of war in November 2018 caused a sharp decrease in sales volumes. The economic situation in Belarus is complex as well, and Baltika’s current franchise partner Valanga OOO has decided to exit the fashion industry.
A plan to close unprofitable shops has been made and new terms of payment and shipment of goods have been agreed on in cooperation with the Russian franchise partner OÜ Ellipse Group.
Consequently, Baltika evaluates the Eastern European partners’ liabilities as not fully collectable and thus creates an allowance for impairment in 2018 in the sum of approximately 1,200 thousand euros.
The early termination of the agreements results in a decrease of nearly 1,000 thousand euros in Baltika`s wholesale and franchise sales revenue in 2019.
Member of the Management Board