Results for electronics chain good reading

Company positioned to take advantage of sharp growth in retail

Investors may want to read up on the Saudi company Jarir Marketing. The bookseller-turned-electronics retailer beat analyst expectations with its second-quarter results yesterday - a 17.3 per cent increase in sales over the same period last year to 75 million riyals. Those results narrowly beat the 74m riyal forecast by the NCB Capital analyst Farouk Miah.

The company began as a single bookstore on Jarir Street in Riyadh, selling office and school supplies, and later found greater success selling electronics in the kingdom and throughout the GCC. It now boasts a market capitalisation of 5.4 billion riyals. Jarir's sales were helped by the company's continued expansion, as it added three stores this year to the 25 it operated last year. Jarir, which accounts for 50 per cent of the Saudi consumer electronics market, plans to add two more stores in Riyadh this year.

"It's a key growth driver for the company, to capitalise on the growing [information technology] sector in the GCC," Mr Miah said. He has an outperform rating for Jarir, with a target price of 170 riyals. Jarir was down 0.6 per cent to 159.5 riyals on the Saudi Tadawul All-Share Index yesterday. The company's prospects are closely tied to the fortunes of the Saudi retail sector, as only four of its stores are in the broader GCC. According to a recent study by CB Richard Ellis, retail sales in the kingdom should climb sharply to US$125bn this year, from $75bn last year.

The expected jump in sales is attributed to a rising mall culture - which has prompted retailers to add stores and market aggressively - and to strong religious tourism. Jarir's latest results, while largely positive, do show a couple of areas of concern. The company's profit margin was 11.2 per cent, down from 12.6 per cent for the same period last year. Jarir attributed the performance to smaller margins in electronics generally because of greater competition.

The company also reported lower sales in its stores outside the kingdom, which runs counter to recent trends. [e-mail]