Castro closing stores in Russia

Israeli fashion chain decides to shut down its stores in Moscow, Volgograd and Yekaterinburg due to local franchisers' debts, violations of contract

Reuters | Published: 02.24.11, 07:41

Israeli fashion chain Castro has decided to shut down three of its stores in Russia due to the local franchiser's debts and ongoing violation of contract terms.

The company informed its franchiser last week that it was annulling all the agreements and concluding its activity in the country.

Castro expects the franchiser's bank guarantee, totaling about $1 million, will cover the costs of canceling the agreements. According to the contract, the merchandise which has yet to be sold is owned by the company, which can now sell it to third parties.

Therefore, stated Castro Co-CEO Gabi Roter, the annulment is not expected to have a fundamental impact on the company's activity.

Castro, which has been operating in the Russian cities of Moscow, Volgograd and Yekaterinburg since 2004, has been considering ending its activity in the country for quite a while.

The current franchiser is its second one in Russia, after the first franchiser got into debts as well. In November, the chain stopped shipping clothes to Russia and postponed the opening of a store in St. Petersburg.

In the fourth quarter of 2010, Castro shut down one of its stores in Germany as well. The chain is also active in Thailand, Switzerland and Kazakhstan.