Al Othaim has plans to supersize its stores
Al Othaim wants to be the Walmart of Saudi Arabia, an ambition that could make for some very happy investors.
The retailer is looking to convince Saudi residents to look beyond their classic "baqalas", or corner stores that deliver to nearby homes, in favour of supermarkets and hypermarkets. At the moment, 50 per cent of Saudi grocers are baqalas.
Al Othaim operates four types of stores - wholesale outlets, hypermarkets, supermarkets and even some baqalas of its own - but sees the most potential in the bigger stores.
As Walmart did to great effect in the US, Al Othaim hopes to negotiate discounts from its suppliers, which it can then use to cut prices and lure shoppers.
Another attraction is the chain's plan to require all outlets to have an in-house bakery based on the theory that the smell of fresh bread is a natural enticement to shoppers.
Al Othaim plans to expand to 107 stores, up from 96 last year. Al Othaim is the second-biggest supermarket chain in Saudi with a market share of 5 per cent last year. The company was set up in 1956 as a single wholesale branch in Riyadh and went public in 2008, with about 40 per cent still owned by the Al Othaim family.
Al Othaim reported a 31 per cent increase in net income to 41.1 million riyals in the second quarter compared with the same period last year. The shares are up more than 15 per cent since the start of the year.
Farouk Miah, an analyst at NCB Capital, maintained its overweight rating but increased the price target by 2.7 per cent to 120 Saudi riyals a share yesterday.
"Its a growth story," Mr Miah said.
Al Othaim closed down slightly yesterday at 91 riyals. The company also plans to boost profitability by increasing the number of products carrying its own label.
As it stands, 5 per cent of its products are labelled Al Othaim but the retail giant wants to increase that to 15 per cent by next year.
Published: August 15, 2011 04:00 AM