Mall operator's revenues grow despite VAT and negative consumer outlook
Strong growth, helped by its regional expansion, saw Majid Al Futtaim, the Dubai-based mall operator, report a 13 percent increase in H1 revenues this week, despite a negative consumer sentiment and the impact of VAT proved challenging in the UAE, according to company CEO Alain Bejjani.
“Our revenues are up, which shows resilience in a market that has had some adverse conditions, especially around consumer sentiment,” Bejjani told Bloomberg TV, adding that the introduction of five percent VAT in January also “…for sure had an impact”.
H1 sales rose to $4.85bn despite “adverse market conditions” with earnings before interest, taxation, depreciation and amortisation growing four percent to $570m.
“There is a long-term view that the government is trying to reinforce in the overall sentiment and that’s very important. It gives us reason to be optimistic about the future,” Bejjani said of recent stimulus efforts by the government to boost confidence in the economy.
Majid Al Futtaim’s strong performance has undoubtedly rested on its aggressive expansion plans – especially in Saudi Arabia where the company plans to open 600 Vox cinema screens in the next five years, along with City Centre malls, Carrefour stores and Magic Planets.
Bejjani said recent social reforms in the kingdom were “extremely important… the government is really walking the talk”.
Bejjani was also bullish about the prospects for the proposed $13.5bn Madinat Al Irfan mixed-use development in Muscat, launched in partnership with the Oman Tourism Development Company (Omran).
The joint venture announced in January will feature 11,000 residential units, 100,000 sq-m of retail space, 700,000 sq-m of office space, along with entertainment offerings.
“It is strategically placed to be the new centre of Muscat,” he said of the ambitious venture.
Majid Al Futtaim is also “extremely engaged in Kenya” with six of ten secured locations already opened, amid plans to expand in neighbouring East African countries.
Meanwhile, Bejjani said that Majid Al Futtaim has secured an agreement with the government to open 100 new Carrefour locations in Egypt.
Carrefour recently launched a new online delivery service in Dubai, Sharjah and Ajman, which allows customers to shop online and have their goods delivered for free.
Bejjani said the group will continue to grow its e-commerce platforms in the coming months.
“Majid Al Futtaim is becoming as prominent digitally as it is physically,” according to Bejjani.
“Consumer habits are changing and we are ahead in that sense. For example we have introduced Carrefour Now, the one-hour service in the UAE, and we will do it across the region. We’re seeing very good pickup online in Saudi Arabia as well. So we are very optimistic.”
But he said physical malls are still important to consumers. “The reality is that it’s about the experience rather than the act of buying. We are very clear about the difference between shopping and buying.”For all the latest retail news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.