By: Thabet Shehata
Riyadh – Mubasher: The Saudi retail sector’s profits retreated in the third quarter of 2016, after the decline in the citizens’ purchasing power.
Lower purchasing power was due to the decrease in wages, remunerations of ministers and Shura Council members, adding to cancelling the annual raise and the announcement of companies’ financial results.
The retail firms’ profits marginally fell 1.2% to SAR 612.73 million ($163.4 million) in Q3-16 from SAR 620.27 million ($165.4 million) in Q3-15.
Analysts see that that the retail firms results were negatively affected in the third quarter, as a result of the last government decisions which led to the decline in the citizens’ purchasing power of the non-basic goods, specifically.
Saudi Arabian Monetary Agency (SAMA) cancelled the appointment allowance and the annual raise for its employees for the year 1438 Hijri, according to Al Hayat newspaper.
The agency also reduced the expatriation allowance to be the salary of only one month, added to no raises on contracts' renewal, extension or even recontracting.
The citizens tended to rationalise spending which will affect the sales retail firms negatively, which will lead to lower profit margins, which was obvious in the companies’ Q3 results, according to the technical analyst Mohamed Al Maimouny.
The 16 retail companies’ profits declined 14% to SAR 1.8 billion in the first nine months of 2016 from SAR 2.09 billion in the year-ago period.
Operating profit of the sector’s companies also decreased 2.6% year-on-year to SAR 618.47 million in Q3-16 from SAR 635.09 million in the prior-year period, while it went down 11.64% to SAR 1.85 billion in the nine-month period of 2016 from SAR 2.09 billion in the same period of the last year.
The analyst noted that the companies tended to lower the prices and increase the promotional offers to cope the fallen sales.
Jarir Marketing reported a marginal growth in earnings in the third quarter of 2016 rise to SAR 220 million compared to SAR 218.5 million, achieving the highest net profits in the sector.
The Middle East Healthcare Company (Saudi German Hospitals) reported net profits of SAR 92.03 million for the third quarter of 2016, up 1.41% year-on-year, from SAR 90.75 million.
As for the first nine months of 2016, the company posted net profits of SAR 274.24 million down by 4.75% from the same period of the preceding year.
L’azurde Company for Jewelry’s net profits dropped 98.65% year-on-year to SAR 338,000 in the third quarter of 2016 from SAR 24.98 million and decreased 17.75% to SAR 72.98 million in the nine-month period of 2016.
Translated by: Sara Ghali
