Reuters – Fawaz Abdulaziz Alhokair Co., the Saudi retailer which franchises brands such as Zara and Marks and Spencer in the kingdom, is studying three to five acquisition targets in the United States and United Kingdom, a company official said on Monday.
The firm, the largest listed retailer on the Saudi stock market, also aims to sell its debut Islamic bond in the next 12 months.
Alhokair, which completed the purchase of Spanish clothing brand Blanco last month for €11m, was talking to respective parties but would only close deals if they were a right fit, Rob Cass, strategy and investor relations director, told reporters on the sidelines of a finance conference in Dubai.
“We are looking at other opportunities, similar type brands that we believe have got the capabilities to grow,” Cass said, referring to Blanco.
The firm was talking to “top-tier international banks” for potential advisory roles on the transactions but hadn’t appointed anyone yet. He wouldn’t be drawn on further details, except to say the deals could complete in the next financial year, which begins on 1 April.
Alhokair, which currently has 1,885 stores across 20 markets predominantly in the Middle East and the CIS countries, is forecast to record sales of between SAR 5.5bn and SAR 5.7bn ($1.47bn-$1.52bn) for the current financial year, with net profit in the range of SAR 760m to SAR 810m, Cass said.
This would indicate a fourth-quarter profit of around SAR 180m to SAR 230m, based on the firm’s nine-month results, up from SAR 136m in the prior-year period.
At the current rate, the business was opening a new store every 18 hours, Cass said, with the firm planning to open 404 stores globally in the next financial year.
Of these, around half will be in Saudi Arabia, with 42 in the United States and 24 in Egypt. The company also aims to open 45 stores for its new INC value brand, with around 30 Blanco stores outside of Spain across Alhokair’s geographical footprint.
Saudi Arabia’s retail market is highly regarded by investors and companies, given its favourable demographics – about 60% of the population is under 30 – and its growing per capita income.
Alhokair is planning to sell its maiden sukuk in the next financial year, Cass said, without elaborating further.
Saudi firms are increasingly turning to the Islamic bond market for their financing needs as they look to diversify their funding sources away from traditional bank finance and tap highly-liquid local investors.
“There is going to be large interest for this and it’s going to be well subscribed, because it’s a great group and a great story,” Cass said.