OREANDA-NEWS. November 13, 2009. The Russian government has insisted upon introducing a new initiative into the Russian retail law, Vedomosti wires, proposing to cut to 10% the premium on a large volume of sold goods from suppliers to retailer, reported the press-centre of OTKRITIE Financial Corporation.  

Current premiums reach are at 15-20%, which lowers the selling prices. If a retailer sells an agreed-upon volume of goods, it receives a discount on the next lot of supplies, and thus may decrease the selling price of those goods. This initiative only applies to Russian producers, and is thus of little concern to foreign companies. The current version of the law should soon be submitted for a second reading.

View: We view this news as neutral for the moment. However, if the current version of the law is approved, it will negatively affect Russian retailers and producers, as it will impact retailers’ margins, and consequently push retailers to work more with foreign suppliers. In addition to this new initiative, the 25% market domination limit and three payment periods have been left in the current version of the law.

Action: We advise investors to exercise caution when investing in retailer stocks, particularly before the final version of the law is passed.