Saudi retailer aims to be kingdom's Wal-Mart

Al Othaim to open more stores in bid to boost profitability

Al Othaim wants to be the Wal-Mart of Saudi Arabia, an ambition that could make for some very happy investors. The retailer is looking to convince Saudi residents to look beyond their classic "baqalas", or corner stores that deliver to nearby homes, in favour of supermarkets and hypermarkets. At the moment, 50 per cent of Saudi grocers are baqalas.

Al Othaim operates four types of stores - wholesale outlets, hypermarkets, supermarket and even some baqalas of its own - but sees the most potential in the bigger stores. As Wal-Mart did to great effect in the US, Al Othaim hopes to negotiate discounts from its suppliers, which it can then use to cut prices and lure shoppers. Another lure is the chain's plan to require all outlets to have an in-house bakery based on the theory that the smell of fresh bread is a natural enticement to shoppers.

Al Othaim plans to increase to 125 stores, up from 89 stores last year. Al Othaim is the second biggest supermarket chain in Saudi with a market share of 4.1 per cent last year. The company was set up in 1956 began as a single wholesale branch in Riyadh and went public in 2008, with about 40 per cent still owned by the Al Othaim family. Al Othaim reported a net income of 31 million riyals in the second quarter, up 61 per cent from the same period last year. The shares are up more than 40 per cent since the start of the year.

Farouk Miah, an analyst at NCB Capital, has an "overweight" rating on the stock with a price target of 79 riyals a share. "Its a growth story," Mr Miah said. Yesterday, Al Othaim closed down slightly at 72.75 riyals. The company also plans to boost profitability by increasing the number of products carrying its own label. As it stands, 5 per cent of its products are labelled Al Othaim but the retail giant wants to increase that number to 15 per cent by 2012.