F&B, international operations drive stable revenue for Fawaz Alhokair

Saudi Arabia based lifestyle retailer Fawaz Abdulaziz Alhokair Co. has recorded stable revenue driven by its F&B business and international operations, which counterbalanced the softer seasonal domestic operating environment. The company announced its results for the second quarter and first half of the year ending September 30, 2022 (Q2-FY23 and H1-FY23), reporting steady revenues of SAR1,373 million and SAR3,079 million, respectively.

Commenting on the results, Ahmed Belbesy, Chief Financial Officer, Alhokair said, “We have established a firm base and are confident in Alhokair’s ability to drive forward in the face of market challenges. In KSA, the secular change in consumer spending habits has been further impacted by a return of summer travel following a COVID-impacted two-year period, and the return and rise of pre-pandemic activities.”

“We have successfully maintained a positive revenue trend, supported by our F&B and international segments, which continued to deliver solid results during this period. By persistently optimising our operations we will focus on delivering improvements in profitability and added value for our shareholders.”

Strong segment performance

Alhokair recorded revenues of SAR1,373 million in Q2-FY23 compared to SAR1,361 million in Q2-FY22. This was largely due to the growth of both F&B and international retail sales, which saw year-on-year (YoY) increases of 5% and 9%, respectively. Revenue for H1-FY23 was broadly flat at SAR3,079 million, as a result of the decline in KSA retail sales, which has largely offset the positive impact from the international portfolio and F&B segment.

In addition, online sales remained an area of focus for the company, witnessing a 14% YoY growth in H1-FY23, to SAR 132 million. The e-commerce business in KSA has been gaining traction, with market reports indicating that the segment is expected to grow at a compound annual growth rate (CAGR) of more than 15% by 2026. And Alhokair is committed to digital as a key pillar of its operational upgrade strategy to maintain its position as the partner of choice for leading brands and to provide a distinctive omnichannel experience to its broad base of customers.

International retail operations continued to thrive during the period, with revenues of SAR285 million, up 9% YoY in Q2-FY23, and SAR 552 million in H1-FY23, up 15% YoY, despite currency fluctuations, driven by the sustained positive momentum from CIS countries and Jordan. Alhokair continues to focus on expanding its presence in select strategic growth markets. In addition, international retail sales increased by 8% YoY in like-for-like (LFL) terms for Q2-FY23, largely due to the steady improvement in performance of the CIS countries and Jordan, which is expected to continue, despite the weaker performance from Egypt.

The F&B segment recorded an improvement in revenues, increasing 5% YoY to SAR137 million in Q2-FY23 from SAR130 million in Q2-FY22, with a net opening of seven stores during the quarter. This follows success in the first quarter of the year, with the first streams of income from the Subway brand in the form of sub-franchise royalty fees. Alhokair is advancing on its plan to acquire 45 stores of the existing sub franchises, with the acquisition of 30 of these stores anticipated to be finalised in H2-FY23. For H1-FY23, F&B segment revenues amounted to SAR253 million, increasing 7% YoY.

Selling, general and administrative expenses (SG&A) decreased 2.7% YoY in Q2-FY23 to SAR113.8 million and 6.3% YoY to SAR243.3 million in H1-FY23, as a result of Alhokair’s continued focus on cost rationalisation and operational efficiencies. Overall, SG&A-to-revenue therefore decreased to 8.3% in Q2-FY23 from 8.6% in Q2-FY22, and from 8.5% to 7.9% in 1H-FY23.

The company remains steadfast in expanding its growth segments both locally and internationally, by on-boarding new brands and increasing its digital footprint, while continuing to explore new and unique concepts that address the rapidly changing demands of today’s consumers.