The UAE’s Landmark Group continues to report strong demand for bricks and mortar retail and expects to open hundreds of stores in the years ahead, but it will depend on internal funding for expansion with no plans to list any time soon, according to a senior executive.
“We continue to open 150 stores a year, so on an average, we will probably end up opening 200 to 250 stores [globally] every year for the next three years,” Kabir Lumba, chief executive of Landmark Retail, told The National.
The brick-and-mortar expansion comes alongside a focus on e-commerce, which contributes close to 20 per cent to the group’s overall business, although some categories perform better than others, he said.
Founded in 1973 with one shop in Bahrain by businessman Micky Jagtiani, who died in May this year, the company has expanded into one of the largest retail and hospitality conglomerates in the Middle East and India.
It operates more than 2,200 outlets, covering more than 2.7 million square metres in 21 countries. It has more than 50,000 employees across brands including Centrepoint, Babyshop, Splash, Lifestyle, Max, Home Centre, Shoemart and Emax.
“We feel that e-commerce will grow faster … it is still a very, very large part of our business,” Mr Lumba said.
But the “stores are not going to disappear”.
“We continue to expand, and we continue to renovate our stores. There's an immense belief in the store channel as well. And it's not just in the Middle East, we continue to expand in other parts of the world – we have a strong business presence in Malaysia and Indonesia, as well as India,” he said.
The group, which has a presence across the GCC, will focus on the UAE and Saudi Arabia, the Arab world’s two largest economies.
“My belief is that some of the countries in the Middle East will have an increase in population … and Saudi [Arabia] and the UAE are the two largest markets from a population and consumption standpoint. I think that will continue to grow,” he said.
“From a Landmark Group standpoint, I think we will continue to get a larger share of wallets because of our diverse portfolio … We are cautiously optimistic – one should remain so because competition is very, very high. So, we pride ourselves on remaining grounded.”
The retail sector in the GCC is projected to have grown 15.7 per cent annually to surpass pre-Covid levels last year with revenue reaching $296.8 billion, according to a report by Alpen Capital.
Retail sales in the six-member bloc are forecast to grow at a compound annual growth rate of 5.7 per cent between 2022 and 2026 to reach $370 billion, the report said.
Saudi Arabia and the UAE continue to lead the sector regionally, cumulatively accounting for 78.5 per cent of total sales by 2026.
“This is largely due to their large and diverse population base, liberalisation of policies and a growing appetite for unique shopping experiences,” the report said.
Landmark also has a presence in Egypt, although it is facing challenges from currency devaluation, Mr Lumba said.
The Arab world’s most populous nation has been facing a dollar shortage brought on by the economic repercussions of the Russia-Ukraine war that have held back its import-heavy economy and its industrial sectors.
It has also devalued its currency three times since March 2022, with the pound losing half of its value in the period.
“We've also seen a challenge to sort of export into Egypt, because dollars are not freely available. So while we feel there is potential in the country, [with the population at more than 100 million], we definitely feel some of the macro factors in Egypt could have been a little bit more favourable than they currently are,” Mr Lumba said.
Ticking all the boxes
Consumers are seeking a number of factors, including product, quality, experience, price, convenience and sustainability, said Mr Lumba.
“I think if you leave even one box unchecked, you are getting into a zone of consumers feeling a certain level of disservice. We do a combination of essentials as well as on-trend. And I think if we didn't have that mix, probably we wouldn't be where we are today,” he said.
“The one thing that I definitely feel is that consumers are very, very optimistic and buoyant about the future, specifically in this part of the world, in the Middle East. India is one of the fastest growing economies, so I think double digit growth is almost par for the course.
“In South-east Asia, we've just kind of started so I would say we are in a start-up phase that will take us some time to build.”
The coronavirus pandemic, which significantly disrupted supply chains globally, led to a surge in prices.
While Landmark was hit by an increase in raw material and supply costs, Mr Lumba said they took a conscious effort to absorb some of that, with price corrections of 3 per cent to 4 per cent.
“Probably that's why we've had very stable growth. We've also had specific initiatives in the childrenswear category where, frankly, there were price reductions when there was inflation,” he said.
IPO not on the cards
While the GCC has experienced a surge in initial public offerings in recent years on the back of strong investor interest, Landmark is not currently considering one, Mr Lumba said.
The company remains “financially sound” and is also profitable, he said, without disclosing specific numbers.
“We don't have significant leverage with banks. So overall, we use our organic cash flows to expand … We have strong relationships with the banks that we operate with here. But it's more for support and not so much because we are in the need of funds,” Mr Lumba said.
Looking ahead, the company plans to launch another business segment, with the move expected to be firmed up in the next 12 months.
“We prefer to strengthen our strengths. I think we have a very strong retail and hospitality focus. So, it's all about consumers, we are about value products, great quality, FMCG [fast-moving consumer goods] in nature,” Mr Lumba said, when asked about the nature of the new business.
The focus will remain more on building brands in-house rather than acquisitions.
“We don't lack the hunger, we don’t lack the ability to invest, it’s just that we want to go and seek out the right kind of opportunity. And that's a lot to do with the DNA of the organisation,” he said.
“We prefer building rather than buying and that hasn't changed for some time … Never say never, but right now, honestly, there isn't anything on the cards.”