Lingerie Market in Russia Boosting Silvano Sales, Chief Says

Lingerie Market in Russia Boosting Silvano Sales, Chief Says

By Ott Ummelas

May 5 (Bloomberg) -- AS Silvano Fashion Group, the second-largest publicly traded Baltic clothing company, expects sales of lingerie in Russia to generate growth as its home markets deteriorate, Chief Executive Officer Sergei Kusonski said.

The Russian lingerie market, which accounted for half of Silvano's revenue last year, will probably expand at an annual 10 percent to 15 percent rate for the ``next few years,'' Kusonski said in a telephone interview last week. Ukraine, Belarus and Kazakhstan will also have ``major'' growth, and Silvano's performance will at least match the market, he said.

``In Ukraine, we expect more or less the same growth as in Russia, or a bit higher, in Belarus, a bit lower, and in Kazakhstan, the same or a bit lower this year,'' Kusonski said from his office in Tallinn, Estonia.

Silvano has benefited from economic expansion in the former Soviet republics and higher sales to retailers of its Oblicie and Milavitsa underwear brands. It aims to increase the proportion of goods sold through its stores from about 20 percent of the total by opening 60 outlets this year. Sales almost quadrupled in 2007 to 1.54 billion krooni ($153 million).

Silvano, also listed on the Warsaw Stock Exchange, has declined 30 percent this year in Tallinn, compared with a 19 percent loss in the Nasdaq OMX Tallinn index. Silvano is down 11 percent since April 18, when it denied it was in takeover talks with Poland's largest publicly traded clothing retailer LPP SA.

Baltic Slowdown

Russian economic growth, at 8 percent in the first quarter, is fueling incomes and spending, helping to compensate for slowing retail sales in Estonia, Latvia and Lithuania.

Silvano has seen ``signs of a slowdown'' in the Baltic countries, Kusonski said, without giving details. Those states represented 15 percent of revenue in 2007 while lingerie accounted for 88 percent of total revenue last year.

AS Hansapank, the biggest lender in the Baltic countries, on April 29 forecast slower economic growth for the region through next year due to weakening domestic demand, higher inflation and the slackening global economy.

Silvano is shifting production from its Liepaja, Latvia-based factory to Belarus and China to counter rising wage costs, Kusonski said. The company is also moving production in Belarus outside the capital of Minsk, he added. Belarus generated 18 percent of the company's revenue in 2007.