Retailcorp sheds raft of brands

The retail arm of Dubai World is dropping a raft of brands as part of a radical overhaul of the company.

DUBAI // The retail arm of Dubai World is dropping a raft of brands as part of a radical overhaul of the company. Retailcorp World, which used to be known as Nakheel Retail, has closed its Lamborghini branded cafes and has cancelled plans to bring the US gourmet grocery chain Balducci's and the urban fashion brand Joe Bloggs to the region.

The company will instead focus on its more profitable and less risky sports stores, said Abdul Wahid al Ulama, the executive vice chairman of Retailcorp World. The company, which runs Go Sport and Nike stores in the region, said the decision to pull back on its expansion was made in the light of Dubai World's restructuring and the economic downturn. "When you are in this process that we are in, in terms of our parent, you really focus on what you are good at. You don't go into uncharted territory. You don't try to take risks, and that's what we've done," he said. "We're focused on getting our margins up, looking at the retail offer, making it better, improving our profitability."

The new course contrasts starkly with the aggressive approach to retailing the group took just two years ago. In April 2008, the company said it would begin building five malls in Dubai by the end of that year. It was to construct shopping centres on Palm Jumeirah and Palm Deira, the 140,000 square metre second phase of Ibn Battuta Mall, and India Mart and Great Mall, both in Nakheel's International City, adding 1.2 million sq metres of retail space to the emirate. The shopping centre on Palm Deira would have been the largest in Dubai.

In August 2008, the group announced it would bring the high-end food emporium Balducci's to the Middle East, establishing the New York retailer's first international locations. But in March last year, after the economic downturn began to bite in the UAE and retail sales slowed, the group postponed its US$3 billion (Dh11.01bn) mall expansion plans. And by October, Nakheel Retail became Retailcorp World, a new entity directly under Dubai World.

This shift gave Retailcorp World the ability to raise its own funds for retail and mall projects instead of using Nakheel's central funding, officials said. One month later, Dubai World shocked global markets when it called for a standstill on a portion of its debt of about $26bn. Against this background, Retailcorp World is taking a more measured approach this year, said Mr al Ulama. Its plans for new malls continue to be on hold, including the addition to its existing centre, Ibn Battuta, he said.

The company has some operating income to be used for new retail stores, but getting financing from banks has been difficult, he said, and Retailcorp World will be seeking joint-venture partners to help fund the construction of any new shopping centres in the future. "The expansion of Ibn Battuta, we are looking at it, but it is not the priority. The priority is to look at what we have - and how we upgrade the offer. And if there is an overwhelming need to expand, we will do so."

Customer traffic at Ibn Battuta Mall was flat last year compared with 2008, he said. However, it has been improving in the first few months of this year. Customer traffic has grown by 5 per cent to 10 per cent, while sales are "slightly better" than last year. Traffic at Dragonmart, a 150,000 sq metre dragon-shaped centre for Chinese traders in International City, was up by 20 per cent over the previous year as consumers sought out lower-priced goods, Mr al Ulama said.

On Tuesday, the group opened its third Go Sport and fifth Nike store in the UAE at the new Mirdif City Centre. There are plans for one more Nike outlet in Abu Dhabi this year, Mr al Ulama said. Retailcorp and the French food retailer Auchan opened the first outlet in Dubai last October, and the group is looking for new locations. In the long term, it plans to open 55 Auchan stores across the region in 10 years, but it does not yet have a firm arrangement for a new location to open this year.

Mr al Ulama said the shift to a more conservative approach had been carefully considered. "I think all of this is good," he said.