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Euroset CEO sees ‘purgative’ year ahead for Russian retailers

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MOSCOW, Jan 26 (Bloomberg) -- The head of Russia’s largest handset chain said 2015 will be a year that allows the country’s strongest retailers to prosper while an economic storm challenges rivals.

“It’s like in ‘Forrest Gump’ -- when they started the shrimp business it was struggling at first, but when all the other boats sank after a storm it turned into a success,” said Euroset Holding NV Chief Executive Officer Alexander Malis, referring to the fictional Bubba Gump Shrimp Co.’s rise after a hurricane wrecked all other boats in the region. “2015 will be such a storm for Russian retail.”

The Russian economy faces a repeat of 2009’s recession as falling oil prices have helped send the ruble lower, compounding the effect of U.S. and European sanctions imposed in light of the Ukraine crisis. The slowdown may have a “purgative effect” on the country’s retailers, putting dozens of store chains out of business as sales slump, Malis said.

“As much as half of retailers -- at least in electronics - - may cease to exist,” the CEO said.

Companies that sought to attract investment or loans by focusing on increasing sales rather than making profit will be most at risk, he said.

Euroset, co-owned by Russian wireless operators OAO MegaFon and VimpelCom Ltd., is debt-free and avoiding new borrowing amid surging interest rates, Malis said.

Russian retailers will also be hurt by a consumer-loan crisis, according to the CEO. Last year, about 20 percent of consumer electronics were purchased with credit, he said, though he predicted that proportion will decline in 2015 after the central bank increased the benchmark rate to 17 percent from 10.5 percent.

“If previously they agreed a loan to every third client requesting it, now they do to every tenth,” Malis said.

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