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Tue 8 Mar 2016 05:25 PM

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Saudi retailer warns Q1 sales may slump by up to 30%

Jarir Marketing says most product lines will see lower sales, particularly high-end smart phones, computers

Saudi retailer warns Q1 sales may slump by up to 30%
(Getty Images - Photo for illustrative purposes only)

One of Saudi Arabia's biggest retailers, Jarir Marketing, warned on Tuesday that its sales would plunge by as much as 30 percent in the first quarter of this year, a sign of low oil prices weakening the kingdom's economy.

"The company expects this decline will affect most departments, particularly electronics because of lower sales of smartphones...as well as computers and peripherals," Jarir said in a statement to the stock exchange.

The decline is partly because sales were unusually high in the first quarter of 2015, when they hit 1.9 billion riyals ($507 million) as King Salman granted a bonus of two months' salary to state employees to mark his accession to the throne.

But it is also due to state austerity measures in response to low oil prices, which caused the government to run a budget deficit of nearly $100 billion last year.

Jarir's chairman Muhammad Al-Agil told Reuters in January that government spending curbs had cut overtime payments and other bonuses to employees in the public sector, where most Saudi citizens work, and may have reduced their income by about 10 percent.

Mazen al-Sudairi, head of research at al-Istithmar Capital, said that excluding the impact of last year's royal bonus, Jarir's sales were still expanding, but growth was clearly slowing because of the economic environment.

"The decline in consumer spending was widely expected and we have started to see signs of it over the past two or three months, but most of it is in the area of durable goods," he said.

"It is normal that people spend less at times of concern over a slowdown. People will start to spend less on the number of times they dine at restaurants and so on...and definitely will think twice before they buy a new car or a Rolex watch."

Sudairi said that while companies in the Saudi food and healthcare sectors would continue to grow, firms such as durable goods retailer United Electronics (eXtra), clothing retailer Abdulaziz Alhokair Co and jeweller Ahmed Fitaihi Co could become vulnerable to slower consumer spending.

Jarir said that its plan to open at least six new stores in Saudi Arabia this year would not be affected by the drop in sales.

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