Saudi retailer Cenomi reveals major brand sale

Alamy via Reuters

• Ongoing turnaround strategy
• Losses of SAR1.1bn in 2023
• Focus on ‘champion brands’

Saudi-based franchiser Cenomi Retail has announced the sale of 16 brands in the first quarter of 2024 as part of a turnaround strategy to stem mounting losses.

Cenomi transferred 226 stores in Saudi Arabia to Abdullah Al Othaim Fashion Company. This follows the retailer’s exit from some international markets and the net closure of an additional 219 stores in 2023. 

A subsequent board approval has been given for the sale of an additional five brands – Aldo, Aldo Accessories, Pedro, La Vie en Rose and Charles & Keith – and 121 stores to Abdullah Al Othaim Fashion Company in a deal worth SAR219 million ($58 million) plus inventory.

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The turnaround strategy is in response to losses that totalled SAR1.1 billion last year, while accumulated losses rose to SAR1.4 billion.

Group revenues of SAR5.2 billion – down by 5 percent – were affected by the closure of outlets, although international retail revenues improved by nearly 8 percent to SAR1.1 billion on strong demand for Inditex brands such as Zara, Pull & Bear and Bershka. 

In addition, the group’s liabilities exceeded its assets by SAR3.1 billion as of the end of 2023, prompting auditors to raise concerns in its latest financial results statement issued over the weekend. 

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The company said proceeds from brand disposals will be directed towards reduction of debt, which stood at SAR2.3 billion at the end of last year. 

The board is also seeking shareholder and regulator approval for a 91 percent capital reduction “to offset accumulated losses”, according to a filing to the Saudi Stock Exchange on Monday.

Acting CEO Salim Fakhouri said: “Cenomi Retail is in the midst of a significant turnaround strategy. The business continues as originally outlined last year with the objective of strengthening the performance and financial stability of Cenomi Retail.”

This includes rationalising its portfolio to focus on so-called champion brands such as Zara and Subway and profitable stores in the fashion and food and beverage categories. 

“Cenomi Retail’s operational cash flow remains strong with no impact on day-to-day business operations including commitments to brand partners, landlords and financial institutions,” he added.

The company said its portfolio transformation is improving operating results. 

In Saudi Arabia, average revenue per store grew 13 percent last year, increasing to 24 percent in international markets. 

Last year, Cenomi Retail opened 47 retail stores and closed 266 to end with a store count of 1,091 – 824 in Saudi Arabia and 267 overseas.

Before the turnaround strategy, Cenomi Retail was active in 1,842 stores across 100 shopping malls in 13 countries with a portfolio of 95 brands, according to its website.

Last year, Cenomi Retail and mall operator Cenomi Centers held talks on a possible merger, but these have now been suspended because bosses believe market conditions are unfavourable.