"The situation is dire." Clothing and footwear manufacturers are leaving Russia en masse.

Clothing and footwear retailers continue to scale back their operations in Russia amid financial problems, said Valentina Mironova, president of the Union of Light Industry Manufacturers and founder of Lady Charm. "Companies of all sizes, small, medium, and large, are leaving our market at an accelerating pace. In 2025, such well-known companies as I'm studio, Mellow, Incity, Deseo, Just Clothes, Inspire Girls, the wonderful children's clothing brand Orby, and others closed," she told RBC.

According to Mironova, the main reasons for this were the high tax burden, the constant rise in rent and costs, and competition from marketplaces and gray imports. The trend of closures—complete or partial—continues, with "at least 30% of businesses operating in the red," she emphasized. "The situation in our market is dire: losses in clothing production are mounting, and the return on assets (0.8%) is practically zero. The situation in the leather industry is even worse—15 large manufacturing companies (Francesco Donni, Romer, Obuv, etc.) closed last year, not to mention many smaller ones," Mironova stated.

She warned that the planned increase in the VAT rate from 20 to 22% in 2026 will only worsen the situation for industry players, increasing costs by approximately 6%. "Supplying us with all goods and services—fabrics, logistics, housing and utilities, etc.—will become more expensive. Lowering the revenue threshold for VAT payment to 10 million rubles… will affect design studios, repair shops, and retailers… Many of them will be unable to pay VAT and will be forced to close," Mironova noted.

According to her, both shoemakers and garment manufacturers "barely have enough money to maintain production": the companies are operating on the brink of profitability or are already "eating through savings." At the same time, they cannot raise prices, as this would lead to a drop in demand due to the declining purchasing power of Russians, and selling their businesses in the light industry is "practically impossible right now" for the same financial reasons.

Mironova added that companies are considering "two options for survival: either transfer production to other countries, as Gloria Jeans did, or go underground, into the gray sector, operating on the black market." She pointed out that China, Uzbekistan, and Kyrgyzstan have zero import duties on fabrics, while Russia imposes a 20% duty. In the latter two republics, VAT is 12%, personal income tax is 10% and 12%, and corporate income tax is 10% and 15%, respectively. There is no export duty on finished goods. Therefore, according to her, it is more profitable to produce clothing and footwear in Uzbekistan and Kyrgyzstan and sell them in Russia.

Mironova added that the government is aware of these problems and has created a commission to develop a development strategy for the industry through 2035. However, as a member of the working group, she has not yet seen "any particular desire on the part of officials to correct even the shortcomings of state regulation, let alone provide financial support."

According to the OFD Platform, in the first six months of 2025, the total number of clothing and footwear purchases in Russia decreased by 7% year-on-year, while analysts recorded a 16% decline in the offline segment. Fashion Consulting Group CEO Anna Lebsak-Kleimans attributed the decline in demand to increased basic spending, rising debt burdens, and Russians' desire to save their available funds in deposits.

source: The Moscow Times https://archive.is/oeLj0