x Abu Dhabi, UAEThursday 27 July 2017

Saudi fashion label to grow with UK partner

Al Hokair, the Saudi fashion retailer, is expected to boost profits after launching a new brand focused on children's clothing.

Fawaz Abdulaziz Alhokair and Company should see stronger growth this year through a partnership with the founder of the UK fashion brand Next, analysts say.

The Saudi fashion retailer is looking to open up to 45 stores in the next six months to support its new private label, FG4. The label, a joint venture with the Next founder George Davies, will target those aged under 14.

"This is Alhokair's first foray into both the private and affordable segment of the market, and if executed well could be a significant positive catalyst," said Farouk Miah, an analyst at NCB Capital in Riyadh.

Mr Miah has an "overweight" rating on Alhokair with a price target of 45.1 riyals a share. The stock is down about 15 per cent in the past two months and its sell-off could be a good entry point, he said.

Shares of Alhokair added 6.6 per cent yesterday to 40 riyals.

The retailer is also expected to do well from King Abdullah's social package, worth 350 billion riyals, introduced last Friday to help ease tensions in the country.

"The increases in items like the minimum wage would provide extra money for Saudis, who would spend it in retail stores such as clothing," Mr Miah said.

Alhokair is one of the few Saudi retailers with direct exposure to countries that have faced political instability, with 50 of its more than 1,000 stores based in Egypt, he said.

"We believe the financial impact to date will be limited and any losses from damage will be covered by insurance," Mr Miah said. "Clothing won't be impacted with what is happening in the region."

The retailer is due to report its fourth-quarter results and he expects sales to increase 12 per cent from the same period in the previous year, and net profits to increase 32 per cent.

"With store expansions on track and benefits from the recent restructuring coming through, we believe the coming 12 months should see good sales with stable margins," Mr Miah said.