Russian Ukraine Tensions Mean Higher DIY Sales for Leroy Merlin

Leroy Merlin, a French retailer of do-it-yourself goods, said sales in Russia have surged in recent weeks as customers hurry to make purchases amid concern that tension over Ukraine will lead to higher prices.

“Our same-store sales are growing faster than last year, and so does the average ticket,” Vincent Gentil, who leads closely held Leroy Merlin’s business in Russia, said in an interview. People “think that tomorrow the prices may be higher and their money will be worth less.”

The ruble has declined about 8 percent against the euro this year amid Russia’s annexation of the Crimea peninsula and a continuing standoff with the U.S. and European countries over the fate of Ukraine. “A lot of suppliers” are asking Leroy Merlin to boost prices to account for the ruble, Gentil said.

When a local currency is suffering, people tend to spend savings on long-term goods such as appliances and materials for property repairs, in order to buy before their money doesn’t go as far, said Mikhail Burmistrov, head of St. Petersburg-based researcher INFOLine-Analitika.

Leroy Merlin benefits from Russians renovating old apartments and from a housing boom, according to Gentil. “Russia is totally different from Europe: When you buy a new flat here, it’s empty and you need to do everything -- and for us this is a big market,” he said.

Expansion Plans

The company increased sales in Russia, its second-largest market after France, 30 percent last year and plans to invest more than 1 billion euros ($1.38 billion) to triple the number of stores in the country to as many as 100 within five years, Gentil said. “For now, there has been no effect on our expansion plans.”

The Russian press offices of OBI AG and Kingfisher Plc’s (KGF) Castorama chain, two competitors to Leroy Merlin, declined immediate comment on how the ruble is affecting sales. Anna Trofimova, a spokeswoman for German electronics retailer Media-Saturn Holding GmbH, said the unit of Metro AG (MEO) doesn’t disclose sales.

Leroy Merlin, owned by the French Mulliez family, is Russia’s largest DIY retailer, according to INFOLine. The family also controls supermarket operator Groupe Auchan, the third-largest retailer in Russia, and sport-goods retailer Decathlon.

The U.S. and European Union leveled some sanctions against Russia after President Vladimir Putin annexed Ukraine’s Crimea peninsula last month. The ruble and the Micex Index, Russia’s main equity gauge, fell today as an agreement to ease Ukrainian tensions showed signs of collapse, increasing the likelihood of more sanctions.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net David Risser, Paul Jarvis

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