Financial results revealed: Fawaz Alhokair reports 9% revenue growth

Fawaz Abdulaziz Alhokair Co, the leading franchise retailer in Saudi Arabia, announced its results for the nine months ending 31 December 2021, reporting an ongoing positive trend with Q3-FY22 revenue of SAR 1,466.4 million, a growth of 9% y-o-y and surpassing the pre-pandemic Q3-FY20 level. This translated to a third sequential profitable quarter with net profit of SAR 16.0 million bringing 9M-FY22 bottom line to SAR 82.6 million. The results were underpinned by a solid performance during October and November ahead of renewed restrictions in response to the Covid-19 Omicron variant in Saudi Arabia during December 2021.

“Alhokair has gained momentum with three consecutive quarters of top line and earnings growth driven by the ongoing recovery across our local and international retail operations despite mild softening in consumer demand during December due to Omicron worries,” said Marwan Moukarzel, Chief Executive Officer at Alhokair.

The F&B segment turnaround continues to materialise with major expansions set to continue into FY23 as demonstrated by the recently announced master franchise agreement for Saudi Arabia with Subway, the world’s largest restaurant brand.

The solid progress made by the teams so far this financial year has set the group on-track to deliver a profitable full year performance particularly as it gears up for the Holy month of Ramadan due to start early April. The company is well positioned to achieve its topline target of SAR 6 billion despite renewed Covid-19 related restrictions affecting some operations over the past two months.

“We achieved a healthy financial performance during the third quarter reporting a 16.7% gross margin on higher revenue generation and despite marginal pressures from the ongoing, yet easing, higher landed costs. Operating margins this quarter were affected by a one-off expense of SAR 9 million related to prior years’ tax assessments as well as non-recurring heightened expenses associated with consultancy fees and the Shared Service Centre transitory phase,” said Ahmed Belbesy, Chief Financial Officer at Alhokair.

Alhokair’s revenues for Q3-FY22 increased by 8.6% to SAR 1,466 million driven by the sustained recovery in domestic and international retail revenues particularly during October and November 2021 while consumer demand softened marginally during December 2021 following the emergence of the COVID-19 Omicron variant and related restrictions in Saudi Arabia. Revenues continue to track higher when compared to pre-pandemic levels of SAR 1,290 million in Q3-FY20 highlighting gradual normalisation of consumer behavior.

Revenue for 9M-FY22 increased by 46.1% to SAR 4,528 million as the severe impact of containment measures in response to the Covid-19 pandemic gradually eased and trade rebounded across all operations.

• Saudi retail revenues decreased marginally by 2.8% to SAR 1,037 million y-o-y for Q3-FY22. Saudi retail performance was strong in October and November reporting positive single y-o-y growth yet softened during December following the spread of the Omicron variant and the Saudi government reinstating Covid-related restrictions. For 9M-FY22, revenues reached SAR 3,382 million, up 37.6% y-o-y from SAR 2,458 million.
• F&B segment for Q3-FY22 produced revenues of SAR 131 million, up 9.6% compared to SAR 119 million achieved in Q3-FY21, as the company continued to invest in this important growth segment with 19 new stores openings during the quarter. Sequentially, revenues came in flat, marginally affected by an increase in outdoors F&B activity witnessed alongside the Riyadh season.

The expansion of the F&B segment is gathering momentum with sub-franchise agreements and store openings set to continue into FY23. A master franchise agreement was also concluded with Subway that will see over 145 company owned stores opening in the Kingdom over the next six years, 20 of which are expected in the coming 24 months. The Company also signed a master franchise agreement with rising Lebanese patisserie and bakery concept Secrets, bringing to the Kingdom a new and unique F&B concept.

• International retail operations generated revenue of SAR 299 million for Q3-FY22, up 82.4% on Q3-FY21, and now well ahead of pre-pandemic levels, with the CIS markets, Egypt, and Jordan continuing to drive the positive momentum. Alhokair continues to collaborate with its brand partners across chosen growth markets such as CIS, Egypt and Jordan to drive traditional and online capacity alongside them while simultaneously working on migrating new brands to these countries.
• Online sales for Q3-FY22 were 13% lower to SAR 55 million compared to Q3-FY21 which benefitted from higher demand due to stricter pandemic related restrictions. Online revenue contribution to total revenue (excluding F&B) accounted for 4.1% in Q3-FY22 compared to 5.1% in Q3-FY21 and 4.4% in Q2-FY22.