Jarir to invest SR1 billion to double stores over five years

Updated 19 October 2014

Jarir to invest SR1 billion to double stores over five years

RIYADH: Saudi Arabian retailer Jarir Marketing Co. plans to invest SR1.1 billion ($293 million) over the next five years to roughly double the number of its stores in Saudi Arabia and the Gulf, its chairman said.
The Kingdom’s largest listed retailer aims to open six new stores on average each year, seeking to increase its bottom line 15 percent or more annually, and believes growth could hit 20 percent next year.
“As a general rule, we want to double our store number every five years, and we think the market can support it in Saudi Arabia, the Gulf and eventually in North Africa, starting from Egypt,” Muhammad Al-Agil told the Reuters Middle East Investment Summit.
“In order to do this expansion over five years, we expect to invest SR1.1 billion. More than SR100 million of that is going to be spent outside Saudi Arabia, including Egypt.”
Jarir is one of the stock market's most direct plays on Saudi Arabia's rapid population growth and rising incomes, which is why its shares are up 75 percent since end-2012 compared to a 40 percent gain for the main market index.
The company, which sells books, office and art supplies, computers and some other electronics, has grown from a single store in a Riyadh street in 1979 into a chain with 36 stores. Thirty-one of them are inside Saudi Arabia with the remainder in Abu Dhabi, Kuwait and Qatar.
“We have more than 25 stores in the pipeline. We are expanding our stores and we are opening between four and eight stores a year, averaging around six stores a year. This will bring us to more than 60 stores by end-2018 in Saudi and in the Gulf states of Kuwait and Qatar,” Agil said.
“When we open stores every year, this gives us 18 percent sales space growth, which translates into 10-15 percent sales growth, depending on location.
"Adding the existing stores which are still growing at 8-10 percent, this will give us between 15 and 20 percent growth - for instance next year we think growth will be above 20 percent,” said Agil, who co-founded the chain with his family.
The population of the six-nation Gulf Cooperation Council is projected to climb 30 percent over a decade to more than 50 million in 2020, according to the Economist Intelligence Unit. At present most of the 20.3 million citizens of Saudi Arabia, the largest Arab economy, are under the age of 30.
Saudi labor reforms over the past three years have helped tens of thousands of young nationals secure jobs in the private sector, raising household disposable income.
“In general there is room for growth in the sector, coming from population growth, better education, higher disposable income plus general economic growth,” Agil said.
Earlier this month Jarir posted a 9 percent year-on-year increase in third-quarter net profit to SR203 million, as turnover rose 6.9 percent to SR1.43 billion.
The Jarir chairman said his company had started buying real estate to expand in Egypt but would not open more stores in the most populous Arab country for three years, since at present expansion in the rest of the Gulf was much easier.
“In Egypt, we already have two stores. We have started just preparing real estate — we bought two locations in Cairo and we hope to add more, but we don’t expect to open before three years.
“The Gulf is easy and we ship from Riyadh so it is low-hanging fruit - the Gulf is equal to the Saudi market in total, which means we have major expansion with no difficulty.
"But if we go to Egypt, we have got to have a warehouse, separate people...which is fine, but right now it is very easy for us in the Gulf. We open in Qatar like we open in Jeddah."
Some other companies in Saudi Arabia say they have suffered in the past two years from the labor market reforms, which have made it harder and more expensive to hire foreign workers, in order to pressure firms into hiring more Saudi citizens. Some employers complain that some of the Saudis are unproductive and unwilling to work.
Agil, however, said his company had been successful in training and retaining high-quality staff, as the mindset of young Saudi nationals had changed: They were competitive and willing to learn.
Opening six stores on average every year helps to create between 300 and 400 jobs annually, with most of them going to Saudis, he said, adding that all of Jarir's stores in other Gulf states were managed by Saudis.
“We are not employing Saudis only because of the rules but because we think it is good for business," Agil said.
The number of Saudis working in the private sector jumped to 1.5 million people by the end of last year from 681,481 in 2009, according to the latest available data in the Labor Ministry's annual report for 2013, published in late July.
Agil said he was in favor of gradually escalating the cost of foreign workers’ residency permits and visas, to help secure more jobs for nationals in the private sector.


Emirates trims Boeing shopping list amid 777X delays

Updated 20 November 2019

Emirates trims Boeing shopping list amid 777X delays

  • The Middle East’s largest airline in 2017 signed an initial agreement to buy 40 Boeing 787-10s in a deal worth $15.1 billion
  • But Emirates’s purchases overhaul reduces the order to 30 planes

DUBAI: Emirates Airline on Wednesday slimmed down its purchasing plans with Boeing amid delays in delivering an order of 156 of the new long-range 777X aircraft, substituting instead 30 of its 787-9 Dreamliners.
The Middle East’s largest airline in 2017 signed an initial agreement to buy 40 Boeing 787-10s in a deal worth $15.1 billion, but the overhaul reduces that to 30.
At the same time, Emirates is cutting its 156-strong order of the larger 777X to 126 planes.
The restructuring means that the carrier now has just 156 aircraft ordered from Boeing, compared to 196 previously in both firm orders and initial agreements, an airline spokeswoman confirmed to AFP.
“Emirates reduced its 777X order of 156 to 126 and substituted them with the Dreamliners,” Emirates president Tim Clark told a news conference at the Dubai Airshow.
Boeing said the airline will update its order book “by exercising substitution rights and converting 30 777 airplanes into 30 787-9s.”
Emirates said in a statement that for the 777X, it “will enter into discussions with Boeing over the next few weeks on the status of deliveries.”
Emirates in 2013 signed a $76-billion contract for 150 Boeing 777X twin-engine aircraft, powered by GE’s new GE9X engine, in what was the single largest order by value in the history of US commercial aviation.
The order was subsequently increased to 156 planes.
The 777X was originally scheduled to take off on its first test flight this summer, however its development has been slowed by issues with the engine and Boeing has pushed back the timeframe to early 2021.
The delays also hit as Boeing is in the process of completing changes required by regulators on the 737 MAX, which has been grounded worldwide after two crashes that resulted in 346 deaths.