Sold-Out-in-Sochi Means Braving Two-Hour Lines for Olympic Hats

Feb 13, 2014 9:40 am ET

Feb. 13 (Bloomberg) -- Andrey Braginskiy says he took one look at the two-hour-long lines in a Sochi Olympic village store and figured he’d load up on souvenirs at the airport instead. He had no luck there either, finding vendors had sold out of the Team Russia backpack and scarf he coveted.

“The Olympic spirit is unbelievable,” said Braginskiy, a spokesman for OAO Moscow Exchange who traveled to Sochi for the opening ceremony. “I just couldn’t afford to spend a couple hours in line.”

A week into the winter games, Russians are snapping up Olympics-related memorabilia at a clip that has surprised analysts at firms from Barclays Plc to UralSib Financial Corp. Moscow-based X5 Retail Group NV jumped 2.4 percent in London this week while OAO Magnit, Russia’s biggest food retailer, which also sells toiletries and household goods, has climbed 1.2 percent by 2:38 p.m. in London. That compares with a 0.1 percent decline in the Bloomberg Russia-US Equity index.

“Olympic games always lift spirits and people spend easily,” Boris Vilidnitsky, an analyst at Barclays in London, said by phone Feb. 11. “The Olympics help improve investors’ perception of Russia. People watch the games and realize the potential of the country.”

The Bloomberg Russia-US gauge rose 0.3 percent to 93.72 yesterday. RTS futures declined 0.2 percent to 135,280 in U.S. hours yesterday. The Market Vectors Russia ETF, the largest exchange-traded fund dedicated to Russian equities, rose 0.3 percent to $26.28 in New York.

Sales Boost

Billionaire Mikhail Fridman’s food retailer X5 is enjoying a “boost” in Sochi goods sales, spokesman Vladimir Rusanov said by phone Feb. 11, without providing details. Grocer OAO Dixy Group, which sells 130 Olympic-themed items, saw a jump in demand after the Games began, the company said in an e-mailed note, citing Ekaterina Kumanina, director of public relations.

The Sochi Olympics, taking place in the Krasnodar region that is Magnit’s home, will probably add as much as 2 percent on a year-over-year basis to the retailer’s sales this month, Barclays’s Vilidnitskiy said.

The games could provide a lift to a Russian economy that has been sputtering. Growth slowed to 1.3 percent in 2013, less than half the previous year’s pace, the Federal Statistics Service reported last month.

“While the games may be viewed by investors as a positive thing in terms of the country’s image, Russia still needs to implement many, many reforms to win investors’ confidence and money,” Ilya Kravets, the New York-based director of investment research at Daniloff, said by phone yesterday.

Dog Sportswear

The average TV audience for Sochi is 8 percent higher than for the Vancouver Games of 2010, a difference of 25.1 million viewers, Interfax news agency reported yesterday, citing International Olympic Committee data. Russia won its first gold medal of the games Feb. 9 in the team figure skating competition, with President Vladimir Putin in attendance.

The official Sochi website offers hundreds of items including Sochi 2014 cufflinks, furniture and dog sportswear, with individual retailers selling their branded merchandise. Baskin Robbins, owned by Dunkin’ Brands Group Inc., created a special low-fat ice cream branded Sochi 2014, spokesman Mikhail Faynberg said.

Revenue from the Sochi 2014 Marketing Program has exceeded $1.3 billion, the Games’ official website said. Licensees for the Games issued about 5,000 souvenir items with Sochi 2014 symbols, and sales of official products may reach $500 million, according to the website.

Licensed Goods

“I spent two hours in line to buy a licensed Olympic hat, and when I got in, I was told they were out of hats,” Ekaterina Gundareva, an events organizer who came to Sochi to see the Games, said by phone yesterday. “I had to get something, so I bought Olympic gloves, for me and my parents.”

The licensed hat costs 1,700 rubles ($49) at Russian department store Bosco, compared with 350 rubles for a similar non-Olympic branded hat, Gundareva said.

“The demand is feverish, we have queues in our Sochi stores,” said Olga Yudkis, spokeswoman for fashion retailer Bosco Group, one of 55 licensees at Sochi Olympics. Gloves with rainbow-colored fingers and mittens with national flags are among best-selling items along with T-shirts and mascots.

Dixy fell 1.9 percent to 325.50 rubles in Moscow today. The company’s 12-month target price implies a 66 percent increase, according to the mean estimate of 24 analysts surveyed by Bloomberg.

X5 slid 1.2 percent to $18.50 in London today, retreating for the first time in eight days from the highest level since June, data compiled by Bloomberg show. Magnit fell from a two- week high, dropping 0.9 percent to $53.60.

‘Tight-Fisted’

“Russians were never known for being tight-fisted, especially when it comes to birthdays, New Years and huge events like the Olympic Games,” Kirill Yankovskiy, director for equity sales at UralSib in London, said by phone yesterday. “It’s a once in a lifetime event, and there’s nothing unusual in the fact that they spend $200 for an Olympic hoodie.”

Sportmaster, Russia’s largest sports goods retailer, is boosting sales of Sochi-2014 goods such as skates, ski and snow tubings, spokesman Sergey Agibalov said by phone. The company, which began selling Olympic-branded goods a year ago, achieved its two-year sales plan during the first year, he said.

Braginskiy, the stock exchange spokesman, said he hadn’t seen lines so long since he was a child growing up in the Soviet era, when people would stream into Moscow’s Red Square to catch a glimpse of Communist leader Vladimir Lenin’s embalmed body.

The mood in the Sochi lines is lighter.

“Those are happy, cheerful crowds,” he said. “People are having fun, chatting and cracking jokes.”

--With assistance from Ksenia Galouchko in Moscow and Maria Levitov in London. Editors: Marie-France Han, Rita Nazareth