Al-Futtaim building towards regional IKEA growth

Al-Futtaim, the Dubai-based retail group, is in talks to bring the home-furnishings giant IKEA to Egypt.

ABU DHABI // Al-Futtaim, the Dubai-based retail group, is in talks to bring the home-furnishings giant IKEA to Egypt even as it begins construction on the chain's largest outlet in the region on Yas Island, a senior executive says. Officials from Al-Futtaim - the IKEA franchise holder in the UAE, Oman and Qatar - and the Yas Island developer Aldar Properties broke ground yesterday at the site of the 32,000-square-metre store that would mark the beginning of IKEA's expansion plan across the Gulf.

Mile Franicevic, the Al-Futtaim group director of retail, said the regional flagship store is due to open in 12 months. The first IKEA stores in Oman and Qatar are in the works and the group is negotiating with the brand's head office in Sweden for franchise rights in Egypt, he added. "Al-Futtaim is continually looking at new acquisitions, new business partners, new opportunities," he said. "In the short term, the focus is on Egypt."

IKEA's regional expansion comes after a year of contracting retail sales, as consumers cut spending amid economic turmoil. IKEA sales in the UAE saw a "marginal decline" last year, which was more prominent in Dubai and Sharjah than in Abu Dhabi, said Mr Franicevic. Still, Al-Futtaim is relocating its store in the capital from Marina Mall to a space more than twice the size on Yas Island because it had outgrown the location, and the lease ends this year.

"We think there is great potential," Mr Franicevic said. Al-Futtaim will spend roughly Dh26 million (US$7m) on stock and Dh30m to fit out the flagship store, and is signing on with Aldar for a 10-year renewable lease for the Yas Island location, said Mr Franicevic. Officials from Aldar would not disclose how much it would cost to build the store. Mr Franicevic expects nearly 1.3 million visitors in the store's first year of operations, up from the roughly one million customers who shop at the Marina Mall store annually.

Al-Futtaim expects to sign a memorandum of understanding for a store in Doha within two months and will likely open Qatar's first IKEA late next year or in 2012. It is still in negotiations for a store in Oman. Al-Futtaim's retail push into Egypt is part of its Cairo Festival City project, a version of the residential-and-commercial development in Dubai, Mr Franicevic said. It should be complete by the end of 2012.