Alshaya revenue plummets 95% as Covid-19 lockdowns force store closures

Acting CEO John Hadden said the franchise operator will have to take ‘tough measures’ in a video to 60,000 employees

Abu Dhabi, United Arab Emirates, November 1, 2019, 2019.  
 Stock Images.
--Starbucks Cafe at the Abu Dhabi Mall..
Victor Besa/The National
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Kuwait's Alshaya, one of the largest international franchise operators in the Middle East, Africa, Europe and Russia, has seen its revenue plummet 95 per cent after closing nearly all of its stores, due to the coronavirus pandemic, its acting chief executive said.

"Together with the rest of the world we all face a common crisis," John Hadden said in an internal video sent to employees and seen by The National. "In just a few weeks everything we know has changed, the spread of Covid-19 has disrupted countries and communities around the globe, the impact on the global economy has been catastrophic."

This is not sustainable for any business anywhere in the world.

The company has gone from serving customers from its 4,500 stores across 20 markets to being virtually static, as governments imposed locked downs to contain the contagion, said Mr Hadden, who is also chief operating officer.

“Today, less than 5 per cent of our stores are open. As a result, our revenues have shrunk by 95 per cent, whilst our cost base has stayed the same,” he said. “This is not sustainable for any business anywhere in the world. At some stage we truly believe that things will get better but none of us know when that will be”.

Alshaya has nearly 90 brands in its portfolio, including Starbucks, Le Pain Quotidien, PF Chang’s, The Cheesecake Factory, Shake Shack, H&M, Debenhams, Mothercare, American Eagle Outfitters, Victoria’s Secret, Pottery Barn, Boots and KidZania. It has 60,000 employees, of which 45,000 are in the Middle East.

There are more than 952,000 Covid-19 cases globally as of Thursday, with over 48,000 deaths, according to Johns Hopkins University, which is tracking the pandemic. More than 202,000 people have recovered.

Alshaya operates in markets across the Middle East and North Africa, Russia, Turkey and Europe. Many countries have issued stay-home directives, imposed government curfews and shuttered shopping malls, severely impacting brick-and-mortar retailers.

Saudi Arabia, Kuwait and the UAE closed malls, with the exception of supermarkets and pharmacies. In Lebanon and Jordan a tight lock down and strict curfew have been imposed.

“It is clear we need to act now,” Mr Hadden said in the video message.

The company has implemented a detailed action plan to reduce costs and will be renegotiating all contracts, the chief executive added.

“We’re stopping recruitment and working with our host brands to reduce orders in the short term. Every cost line is under the microscope,” Mr Hadden said.

However, he emphasised that “reducing operational costs is simply not enough” and “we also have to reduce our people costs”. To protect jobs and benefits for the long term, “we have to take some tough measures in the short term” to manage through the crisis, he said.

Mr Hadden did not specify what specific actions would be taken, but told employees that human resources and the leadership team would be communicating initial actions “in the coming days”. He said the company would continue to support its employees and be transparent about the necessary next steps.

"We have sought to be fair and balanced in our approach," he said. “Please understand, taking no action is not an option. I wish it was otherwise.”

In response to questions from The National, an Alshaya spokesperson said "we have nothing to add at this time to the internal video that was issued to our colleagues". "This video was meant for Alshaya retail and not Alshaya Group as a whole," they added.

In addition to its retail operations, Alshaya Group, founded in Kuwait in 1890, has businesses in real estate, automotive, hotels, trading and investments.