Business | Economy
Outlook dim for glittering malls
Superlatives abound in the Gulf, but one that resonates more than others is the notion that shopping has become a national pastime, with glitzy malls opening across the region.
- By Andrew England, Financial Times
- Published: 23:32 December 8, 2008
Abu Dhabi: Superlatives abound in the Gulf, but one that resonates more than others is the notion that shopping has become a national pastime, with glitzy malls opening across the region.
It is a trend that Fawaz Al Hokair Group, a Saudi retailer, has tapped into since three brothers launched the company with just two menswear stores.
Today, the group is one of the region's largest retailers, operating 11 malls in Saudi Arabia and more than 1,000 stores, covering fashion and furniture to hypermarkets, with outlets in Jordan, Egypt, Lebanon and the UAE.
But with the region facing an economic slowdown, caution is setting in. Most experts expect the footfall in malls to remain relatively robust, partly because in many Gulf countries alternative sources of entertainment are limited.
Whether spending keeps pace is a different matter, and some retailers in the region are already reporting declines in sales. Still, Al Hokair is continuing to expand. In September, the group opened a new mall in Jeddah and it plans to open three new malls next year, including one in Egypt. It also hopes to open around 100 more stores in Saudi Arabia, the UAE and Egypt.
The group is, however, more circumspect about future growth, said Stewart Macphail, the group's chief executive.
"We are taking a slightly more critical eye over all the investments," he said. "The question in our minds is how much new volumes, new activities do we take on during 2009?"
Revenue
Last year the group's revenue grew by 36 per cent, he said, with a forecast of more than 40 per cent growth this year. While the slowdown will have an impact, the group is still anticipating growth of at least 10 per cent next year.
The share price of its listed fashion arm, however, is down around 50 per cent this year, although that outperforms the Saudi Tadwul All-Share index and its profits were up 43 per cent in the first half of the financial year.
In Saudi Arabia, the company remains relatively bullish, in large part due to demographics. Around 60 per cent of the 17 million nationals are under 25 years old. The group has yet to see any significant dent in consumer confidence, Macphail said.
Sales in Egypt, Jordan and Lebanon are also stable. But the company has become more cautious about entering new markets in the next six to 12 months, he said.
The group will also be closely monitoring the situation in the UAE. And over the next 12 to 18 months, Al Hokair will focus on its cost base and will be "driving a much more cash generative business", Macphail said.
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