(Adds dropped words "and hotels" in penultimate paragraph)
HELSINKI, Sept 1 Finland's biggest retailer S
Group is putting plans on hold to establish more hypermarkets in
Russia due to the Ukraine crisis, its chief executive said on
Cooperative S Group, which controls more than 40 percent of
Finland's grocery sales, operates 17 Prisma hypermarkets and
stores in St Petersburg. It had been targeting a total of about
30 outlets as it sought growth.
But the Ukraine crisis and Russia's economic slowdown have
prompted the retailer to re-evaluate its expansion plans.
S Group CEO Taavi Heikkila said it had two new stores in the
process of opening in the city this year but that would be all
"If it were not for the problems stemming from the Ukraine
crisis, I believe we would keep on establishing about three new
stores per year in St Petersburg," he told Reuters in an
"Of course we are looking for possible store locations, but
no decisions on new stores will be made before the situation
The hold-up follows a similar announcement from the CEO of
Stockmann, who told Reuters in April the firm was
freezing its plans to open more department stores in Russian
S Group's Heikkila said Prisma sales in St Petersburg were
still growing even in euro-denominated terms. He estimated
Russian sales would grow this year to 280 million euros ($368
million) from 250 million in 2013, helped by increased demand
and an expanded store chain.
"Like-for-like sales will also be up, some 16 percent in
roubles and a few percent when translated to euros," Heikkila
He showed pictures he had taken of grocery shelves at
Prisma's St Petersburg markets and said he was surprised at how
little Moscow's embargo on Western food imports had affected
selection so far.
Moscow last month imposed a one-year embargo on meat, fish,
dairy, fruit and vegetables from the European Union and other
countries in retaliation for Western economic sanctions over
Russia's involvement in the Ukraine crisis.
Heikkila said Prisma's suppliers' stockpiles of previously
imported goods had held up so far but that it was now seeking
replacements. Prisma imports some 30 percent of the products at
its Russian stores from Finland and sees the quality of Finnish
food quality as a major competitive advantage.
"There is a risk that the products that replace the banned
ones will not be of same quality, and it could be that prices
will be higher," he said.
"But the biggest impact has come from Russia's weak economy
and the devaluation of the rouble. Consumers are cautious as
their purchasing power has weakened."
Heikkila said the company continued to target sales of 1
billion euros from stores and hotels in Russia and the Baltic
countries by 2016.
S Group's operations in Finland, the Baltics and Russia
include groceries, hypermarkets, hotels, restaurants and a bank,
and last year it had total sales of about 11 billion euros.
(1 US dollar = 0.7613 euro)
(Reporting By Jussi Rosendahl; editing by Jane Baird)