UAE's retail sector to fully recover by 2021, Majid Al Futtaim CEO says

The company is planning to continue its expansion in Saudi Arabia and East Africa next year and is considering acquisitions

Alain Bejjani, chief executive of Majid Al Futtaim, is optimistic that the UAE's retail industry will rebound in 2021. Pawan Singh / The National.  

Majid Al Futtaim, the Middle East's biggest mall operator, expects the retail industry to fully recover in 2021 and the company is evaluating potential acquisitions as it adjusts to the post-pandemic reality.

"I think by June 2021 we should be there [fully recovered]," the company's chief executive Alain Bejjani told The National on Thursday. "But … we have to understand that there is a big chunk of retail that currently happens online and … we can't anymore look only at brick and mortar, because some of them will never go back to what it used to be."

Mr Bejjani, who oversees a network of malls, retail outlets and the company’s Carrefour supermarkets, said the UAE’s retail sector is witnessing a "soft W-shaped recovery" so far from the pandemic.

A W-shaped recovery occurs when an economy goes through a recession and into recovery followed by an immediate downturn and then another rebound.

Retail sales in August picked up 3 per cent compared to the same month in 2019 and 2018 due to increased spending by residents, but fell in September and October. Sales have picked up further towards the end of the year, partly boosted by the government’s initiatives, Mr Bejjani said.

He estimates growth in the UAE's retail economy was down 10 per cent annually this year, but said he expects the industry to recover strongly in 2021.

Majid Al Futtaim, which is privately held, had to temporarily shut its malls and businesses following the onset of the coronavirus pandemic. The company saw earnings before interest, tax, depreciation and amortisation (Ebitda) for the six months ending June 30 fall 27 per cent to Dh1.6 billion ($435.6m), while revenue for the period declined 3 per cent to Dh17.3bn.

But as the pandemic restricted people to their homes, the company benefitted from increased grocery sales from Carrefour – the French hypermarket chain it runs in the region. Most of these were transacted online.

In the UAE, the group's digital sales grew 200 per cent annually this year, while markets like Egypt and Saudi Arabia saw transactions rising by 730 per cent and 1,400 per cent, respectively.

“They all started from different bases [so] the growth [rate] is different,” Mr Bejjani said.

To meet increasing demand, the company is investing in setting up more fulfilment centres and deploying artificial intelligence across outlets.

Mr Bejjani said the e-commerce space could also see some consolidation in the near term but declined to provide further details.

The group is evaluating potential acquisitions, he said.

“We are always open and looking for opportunities and in today’s world there has been a lot of movement in the market and some opportunities will definitely come and we are ... ready to look into that,” he said.

The company previously acquired Saudi Arabia's online retailer Wadi.com and smart wallet firm Beam to complement its push into e-commerce. But Mr Bejjani would not be drawn to comment on which sector the mall operator is targeting acquisitions.

“We are looking at all the sectors that we operate in, and in some industries that we are now starting to diversify into, that we think would add value to our ecosystem,” he said.

Majid Al Futtaim is pushing ahead with its expansion of its Carrefour franchise, particularly in East Africa. It already operates in countries like Kenya and Uganda and is eying new markets as well, Mr Bejjani said.

The lawyer turned retail executive is bullish on Saudi Arabia and Egypt – two markets where Majid Al Futtaim is planning to expand. In the kingdom, the company is continuing to invest in its cinema business despite the pandemic.

“The cinema expansion in Saudi Arabia is ongoing despite everything this year. We are opening new screens in Saudi Arabia.”

The conglomerate, which also has a real estate development arm, is planning to release new units in its Tilal Al Ghaf development in Dubai and launch another project in the emirate next year.

The new launch will target increased end-user demand that the company currently sees, Mr Bejjani said.