Saudi shoppers helping high-end sector rebound to new peaks

Saudi shoppers helping high-end sector rebound to new peaks
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With Saudi Arabia less dependent on international tourists for retail sales, the Kingdom largely avoided the slump in sales last year. (Supplied)
Saudi shoppers helping high-end sector rebound to new peaks
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With Saudi Arabia less dependent on international tourists for retail sales, the Kingdom largely avoided the slump in sales last year. (Supplied)
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Updated 01 August 2021

Saudi shoppers helping high-end sector rebound to new peaks

Saudi shoppers helping high-end sector rebound to new peaks
  • GCC retail giant aiming to double revenues in the Kingdom, become dominant player by 2022

DUBAI: The Gulf Cooperation Council (GCC) luxury retail sector has recovered to pre-pandemic levels, with high-end brands performing particularly well, as shoppers splash the cash they saved by not spending on entertainment or travel during the last year, according to one of the region’s biggest retailers.

Consultancy firm Bains & Company in April reported that the GCC luxury goods market declined 16.6 percent year on year to $7.4 billion in 2020, with Saudi Arabia down 8 percent and the tourist-dependent UAE declining 25 percent.

However, Michael Chalhoub, president of strategy, growth, innovation and investment and vice-president joint ventures at the Chalhoub Group, which has 559 stores across the GCC and manages brands such as Dior, Swarovski, Fendi and Louis Vuitton, told Arab News that the market has bounced back.

“I think the luxury market, and fashion in particular, has recovered in 2021, at levels even higher than in 2019,” he said.

“Local consumers are traveling less. And so, consumption has been repatriated. And we estimate that, in normal time, between one-third to 50 percent of the luxury consumption of GCC nationals happens abroad in London, Paris and Geneva. But now, because of the pandemic, they’ve had to stay, in particular in Saudi Arabia, where the borders were blocked for most of the first half of the year,” he added.

With gyms, restaurants, entertainment venues and travel off limits for a long period, Chalhoub said that shoppers now had more disposable income and were feeling free to spend their savings.

“I would say that average income has gone higher because of a lack of entertainment expenses. What people aren’t spending in restaurants and travel, they are probably spending it on taking care of themselves,” he said.




Michael Chalhoub

However, Chalhoub said that the rebound differed across retail segments. Very high-end luxury brands are performing much better than premium or affordable brands. Jewelry, fragrances and beauty brands are seeing strong growth, but he observed that makeup was still down, mainly due to consumers wearing masks and not leaving the house as often.

“With fashion, I think that we’re up by 5 to 7 percent in the region versus 2019, mainly with luxury fashion and even more so with high-end luxury,” he said, looking at the industry as a whole.

Many retailers have seen triple-digit growth in their online sales during 2020, and the Chalhoub Group accelerated its digitalization strategy in line with the wider industry. “If we were to compare 2021 numbers to 2019, we’re probably talking about 100 percent growth for the industry. And this is incredible. I think the numbers I had were plus 96 percent in the GCC as a whole and even 138 percent just in the UAE,” he said.

However, while online sales might be popular for grocery or food outlets, high-end fashion consumers still like to feel, touch and try on clothing before buying.

For this reason, Chalhoub said that the company expects a higher percentage of returns when it comes to online high-end fashion. “We’re inviting our customer to say try it on and then send it back if you need to,” he said.

With Saudi Arabia less dependent on international tourists for retail sales, the Kingdom largely avoided the slump in sales last year. Chalhoub Group has operated in the Kingdom since 1975, where it has six offices, 215 stores and about 3,600 employees.

It now controls 38 percent of the Saudi market, 48 percent of fashion and 55 percent of beauty, but it is aiming to become the largest player in the sector by the end of next year.

“We’ve made Saudi Arabia a main focus for ourselves; we want to make sure that we cater for the new Saudi customers as much as possible. We have a population there that is young and really enthusiastic about some of the transformation that is happening there,” Chalhoub said.

“We’re investing a lot into Saudi Arabia. The objective that we had set ourselves about six months ago was to double our revenues there in eighteen months. And that means investing more and catering to those customers spending more locally rather than internationally,” he added.

One of the ways the group is aiming to capture more of the Saudi market is by tapping into the Kingdom’s local fashion talent. In early July, the company launched Fashion Lab, a first-of-its-kind initiative in the Kingdom, offering local entrepreneurs the chance to win $15,000 in funding to help establish their fashion brands.

Successful participants will get to take part in a two-week “boot camp,” which will help them navigate through the different elements of developing their brand, including marketing, supply chain management, content creation and media exposure.

Looking forward, the Bain & Company report said: “With about 40 percent of the population aged under 25, Saudi Arabia will likely remain the biggest engine of growth for the regional luxury industry in coming years.”


Bahrain to double VAT to 10%: Reports

Bahrain to double VAT to 10%: Reports
Updated 8 sec ago

Bahrain to double VAT to 10%: Reports

Bahrain to double VAT to 10%: Reports

RIYADH: Bahrain plans to increase value-added tax to 10 percent in a bid to curb budget deficits and boost state revenue, 

Bahraini media outlets reported on Sunday.

According to a report published in a section of the Bahraini press, the legislators also discussed the options of reducing wages or social welfare given to nationals to bolster the economy.

According to IMF estimates, Bahrain’s budget deficit will contract by half this year after lower oil prices and the coronavirus pandemic boosted it to a record 18 percent of economic output in 2020.


Petrofac to plead guilty to 7 counts of bribery in Mideast oil projects

Petrofac to plead guilty to 7 counts of bribery in Mideast oil projects
Updated 12 min 53 sec ago

Petrofac to plead guilty to 7 counts of bribery in Mideast oil projects

Petrofac to plead guilty to 7 counts of bribery in Mideast oil projects

LONDON: British oil services group Petrofac said on Friday it would plead guilty to seven counts of failing to prevent bribery to secure projects in Iraq, Saudi Arabia and the UAE between 2012 and 2015, calling it a “deeply regrettable period.”

The company indicated its plans at London’s Westminster Magistrates’ Court after being formally charged by the UK Serious Fraud Office, drawing a line under a four-year criminal investigation. Its shares surged 25 percent in relief.

Petrofac, which has struggled to secure key contracts in the Middle East and has seen its shares battered during the SFO investigation, will formally enter its pleas and await sentencing at London’s Southwark Crown Court on Monday.

Petrofac said offers or payments to agents to help secure projects were made between 2011 and 2017 but that all employees involved had left.

“This was a deeply regrettable period of Petrofac’s history,” said Chairman Rene Medori in a statement, adding that the company’s “comprehensive program of corporate renewal” had been acknowledged by the SFO.

“Petrofac has been living under the shadow of the past, but today it is a profoundly different business, in which stakeholders can be assured of our commitment to the highest standards of business ethics, wherever we operate,” he said.

Former executive David Lufkin, who has separately pleaded guilty to 14 charges of bribery to secure billions of dollars worth of contracts for Petrofac in the Middle East, is also expected to be sentenced on Monday.

His lawyer did not immediately respond to a request for comment.

In March, the UAE’s state-backed oil firm, ADNOC, barred Petrofac from competing for new contracts in the country.

It is the second corporate guilty plea secured by the SFO in five months.

Former Airbus subsidiary GPT Special Project Management pleaded guilty to corruption over military contracts for Saudi Arabia in April.


CFO of Russia's Novatek arrested in U.S. on tax charges of over $93m

CFO of Russia's Novatek arrested in U.S. on tax charges of over $93m
Updated 26 September 2021

CFO of Russia's Novatek arrested in U.S. on tax charges of over $93m

CFO of Russia's Novatek arrested in U.S. on tax charges of over $93m
  • Novatek has grown into a major competitor of Gazprom, produced last year, 18.8 million tons of liquefied natural gas, 5 percent of global output
  • The situation has absolutely no effect on Novatek’s operational and financial activities

RIYADH: The U.S. government has arrested Mark Gyetvay, the deputy chairman of the management board of Novatek, Russia’s second-largest natural gas producer, on federal tax charges for more than $93 million hidden in offshore accounts, according to the IRS statement.


The situation has absolutely no effect on Novatek’s operational and financial activities, adding that it isn’t involved in related litigation, the company said in WSJ about Mr. Gyetvay’s case.


Novatek has grown into a major competitor of Gazprom, produced last year, 18.8 million tons of liquefied natural gas, 5 percent of global output, WSJ said.


The arrest of Gyetvay, comes as Russia wrestles with European regulatory challenges to the Nord Stream 2 gas pipeline running along the bed of the Baltic Sea, seen by opponents as a geopolitical tool, Nord Stream 2 will deliver Russian natural gas to Germany, WSJ added.


Japan's SMBC advising on Aramco's gas pipeline deal: CNBC Arabia

Japan's SMBC advising on Aramco's gas pipeline deal: CNBC Arabia
Image: Shutterstock
Updated 26 September 2021

Japan's SMBC advising on Aramco's gas pipeline deal: CNBC Arabia

Japan's SMBC advising on Aramco's gas pipeline deal: CNBC Arabia
  • A consortium of Asian investors are leading candidates to win the deal
  • The financing structure of the deal will be similar to the $12.4 billion oil pipeline deal

RIYADH: Saudi Aramco has selected Japan's Sumitomo Mitsui Banking Corporation (SMBC) to provide financial advice to the company in a $17-20 billion gas asset sale, CNBC Arabia reported, citing sources.

A consortium of Asian investors are leading candidates to win the deal, after Asian sovereign funds, primarily sovereign wealth funds from China, South Korea, and Singapore, entered negotiations the CNBC source said.

The American Brookfield Fund, which won the Abu Dhabi National Oil Company (ADNOC) gas pipeline deal last year, is among potential investors.

The financing structure of the deal will be similar to the $12.4 billion oil pipeline deal, which was won by a coalition of investors led by EIG Global Energy, the source added.

The sources explained that the deal will be financed using $4 billion of issued shares, while the rest of the deal will be financed through loans from a group of banks.


PIF lender SRC acquires new housing portfolio from Banque Saudi Fransi

PIF lender SRC acquires new housing portfolio from Banque Saudi Fransi
A common residential area built above on the desert near the corniche park in the Dammam, Saudi Arabia (Shutterstock)
Updated 26 September 2021

PIF lender SRC acquires new housing portfolio from Banque Saudi Fransi

PIF lender SRC acquires new housing portfolio from Banque Saudi Fransi
  • It follows other partnerships with banks and real estate finance companies in the Kingdom
  • The company expects the acquisition to provide “long-term liquidity to the housing market”

DUBAI: The Saudi Real Estate Refinance Company has signed its second housing finance portfolio purchase with Banque Saudi Fransi.

The company, which is wholly owned by the Public Investment Fund, expects the acquisition to provide “long-term liquidity to the housing market.”

“We have illustrated to primary originators in the Kingdom the crucial role we play in developing the housing market and supporting their businesses through liquidity and risk management solutions,” SRC chief Fabrice Susini said.

It follows other partnerships with banks and real estate finance companies in the Kingdom, as SRC seeks to promote stability in the real estate finance market. 

“SRC has played a vital role in ensuring that the Vision 2030 housing program objectives are being met and we expect ourselves to play a significant role in this by supporting them,” Rayan Fayez, managing director and chief executive officer of BSF, said.