Riyadh – Mubasher: Jarir Marketing’s performance in the second quarter of 2016 came below expectations after being impacted by weak demand, on the back of slowing consumer spending, especially on discretionary products such as electronics, mobiles and computers, which account for approximately 60% of Jarir’s sales, a note released by Al Rajhi Capital has said.
The company’s net profit of SAR128.5 million (down 17% y-o-y) was lower than Al Rajhi’s estimate of SAR156 million. Revenue was down 1% y-o-y to SAR 1.391 billion despite 4 new store additions over the last year, bringing total stores to 42.
The revenue decline suggests pressure on like-for-like sales among existing stores, the research firm noted, adding that the “impact of revenue drop was compounded by shift in product mix to lower margin products and higher sales and marketing investments to gain market share, resulting in 23.5% y-o-y drop in operating profits.”
Al Rajhi said it believes that slowing consumer spending, which began impacting revenue growth over the past 3 quarters, will remain an overhang on growth for the next few quarters.
“Despite this, Jarir is firm in its pursuit of organic growth via higher store roll-outs in 2016 ( we factor in 6 store roll-outs in 2016 vs. 4 each in last two years), which should aid revenue visibility and partially negate the drop in operating profits of existing stores. For now, we place the stock ‘under review’,” the note concluded.
