The owner of Zara franchises in Saudi Arabia has broken distribution agreements with giants like Marks&Spencer and is in the process of closing stores.
AlHokair reduces its store network as well as its revenues. The Saudi Arabia retailer enters losses in the second quarter of its fiscal year. The company is optimizing its stores and breaking agreements with retailers on a “portfolio optimization”, as stated by the company.
The losses of the group in the second quarter (period ending on September 30) stood at 26.7 million Saudi riyals (6.46 million euros), compared to the benefit of 8.9 million Saudi riyals (2.15 million euros) of the same period of the previous year.
AlHokair, owner of the franchise’s rights for brands such as Zara or Banana Republic in Saudi Arabia, has closed the second quarter of the year with revenues of 1.23 billion riyals (297 million euros), with a 3.1% drop year-on-year.
The company justifies the evolution of the benefit by the increase in financing costs, but also by the fall in sales by the reduction of the store park, “implementation of a portfolio optimization strategy mandating the termination and closure of non-performing stores and disposal of weak brands” also affected the quarterly results.
Last August, for example, the group finalized its distribution agreement in Saudi Arabia with Marks&Spencer, although it maintained the stores in Armenia, Georgia and Kazakhstan. The company also highlighted the breakdown of other similar agreements, although it did not specify which. As detailed by the company on its website, AlHokair has a network of more than 1,750 stores of 75 brands. The company, which has more than 10,000 employees, operates in thirteen countries.