Store closures help Cenomi Retail return to profit

Reuters

• Saudi group had profit of SAR113m in H1
• Closed 11% of stores in the period
• Focusing on ‘champion brands’ such as Zara

Saudi franchise group Cenomi Retail posted net profit of SAR113 million ($30.1 million) during the first six months of 2023, compared with a small loss in the year-earlier period as the company closed dozens of stores.

While 11 percent of its stores closed during the first half of the year, revenue only dipped by 1.9 percent to just over SAR3 billion.

Cenomi Retail’s second-quarter net profit improved from SAR61.9 million to SAR169.2 million, an increase of 173.6 percent year on year, as the company narrowed its focus on growth opportunities in Saudi Arabia and the wider Middle East and North Africa.

• Saudi firms in talks to create retail powerhouse
• Cenomi in bid to shake up kingdom’s online retail industry
• Saudi shoppers encouraged to support local e-commerce

Following a review by CEO Günther Helm, who joined in April, Cenomi adopted a “Saudi First” strategy and will be considering options to exit markets in the United States and the Balkans.  

It also plans to close a total of 55 stores in Morocco and Egypt as part of its drive for profitability.

In Saudi Arabia it has effected 167 net store closures in the first half of the year, ending the period with 835 outlets.  

Cenomi said in a filing to the Saudi Stock Market that it is reaching the end of its reset phase for the market, with about 33 stores expected to close in the remainder of 2023.

Domestic focus

“The Saudi retail market holds immense growth potential, driven by a dynamic and youthful consumer base known for its discerning preferences that are constantly evolving,” Helm said.

“This presents an opportunity that I believe is crucial for Cenomi Retail to capitalise on.”

He said that the decision to double down on the company’s Saudi and Mena focus is “already yielding favourable results”.

“A return to profitability is under way. We have taken significant steps to optimise our inventory and enhance operational efficiency,” Helm added.

Improved inventory management has been a key focus and inventory has been reduced from SAR1.4 billion in Q2 2022 to SAR954 million a year later. 

Cenomi Retail also wants to build on its relationships with “champion brands” such as Zara.

It reported that revenues of Zara in Saudi Arabia increased by 5 percent while other Inditex Group brands, including Massimo Dutti and Zara Home, collectively delivered growth of 2 percent.

In the food and beverage segment, Cenomi opened eight outlets and closed five, to deliver a total of 257 stores. 

Cenomi Retail, formed as Fawaz A Alhokair & Co in 1990, trades in over 1,300 stores across 100 shopping malls in 11 countries and employs more than 10,000 people. 

In May it was announced that talks were under way for a potential merger between Cenomi Retail and Cenomi Centers, also known as Arabian Centres Company, to create a new retail powerhouse.

Discussions remain at an early stage and the parties have not yet reached an agreement on whether to proceed with any transaction, a statement said.

Both companies announced a full rebrand in December under the newly created Cenomi Group, aimed at positioning the company at the heart of consumer lifestyle in the kingdom.