Saudi Arabia's Fawaz Alhokair narrows fourth-quarter loss as pandemic-hit retail recovers

Company plans to exit its US operations in September and is now in advanced talks with a 'serious' buyer

Makkah Mall, which is owned by a Fawaz Alhokair Group subsidiary. Alhokair said weaker offline sales were partially offset by a 'strong online performance'. Reuters

Listed Saudi retailer Fawaz Alhokair narrowed its loss in the fourth quarter, compared with the same period a year ago, as revenue grew due to a recovery in the local retail sector amid loosening Covid-19 restrictions in the kingdom.

The loss for the three-month period through to March 31 narrowed to 348 million Saudi riyals ($92.7m), from a net loss of 915m riyals a year earlier, the company said in a statement to the Saudi stock exchange Tadawul on Wednesday.

Quarterly revenue grew by 4.4 per cent to 1.1 billion riyals due to a gradual recovery in the kingdom's retail segment and the full consolidation of the food and beverage segment, which partially offset the continued weak performance of international markets.

"This financial year presented extraordinary challenges that no market was prepared for, creating one of the most challenging retail operating environments in living memory," said Marwan Moukarzel, chief executive of Alhokair.

"Although a difficult period, which saw sales decline year-on-year in all segments, Saudi retail began to show signs of recovery as Covid-19 restrictions eased, with an improved trajectory in the third and fourth quarters."

The Covid-19 pandemic has driven a shift in consumer spending habits in the Gulf, where shoppers typically purchased products in person and with cash. Digital transactions have increased, while shoppers are also going online more.

The retailer said weaker offline sales were partially offset by a "strong online performance".

Online sales during the fiscal year jumped 408 per cent to 218.2m riyals as Alhokair expanded its online mono-brand platform and multi-brand capabilities.

AlHokair, which owns the franchise rights for brands such as Zara and Banana Republic in Saudi Arabia, posted an annual net loss of 1.1bn riyals, widening from a loss of 681m riyals in the previous year, the company said.

This was due to a decline in full-year revenue, higher selling, general and administrative expenses and one-off impairments, the company said in the filing.

Revenue for the financial year dropped by 20.8 per cent to 4.2bn riyals due to the effect of movement restrictions in response to the Covid-19 pandemic across Saudi Arabia and all international markets in which Alhokair operates, it said.

The company also closed non-performing shops and terminated weak brands during the period.

Selling, general and administrative expenses rose by 24.1 per cent to 442.3m riyals during the year, reflecting a low base effect in the comparable period.

Alhokair said it booked one-off impairments worth 18.5m riyals related to certain doubtful assets and of 17.4m riyals related to a subsidiary in Bahrain during the year.

The company, which previously announced plans to fully exit its US operations in June, is now in advanced discussions with a "serious buyer", according to the filing. It is expected to exit the US by September 2021.

The company will also exit its Balkans operations by September in a move to terminate exposure to non-core, non-performing international assets, it said.