Fawaz Alhokair Q4 FY18 misses estimates on lower sales: Al Rajhi Cap

Fawaz Abdulaziz Alhokair Co.'s net loss of SAR 184 million for fourth-quarter ending March 2018 missed Al Rajhi Capital and consensus estimates of a net profit of SAR 53 million and SAR 50 million, respectively.

Lower-than-expected LFL (like-for-like) domestic sales, down 14.2 percent as against Al Rajhi's estimate of 7.1 percent, and a SAR 80 million one-off cost pertaining to IFRS transition were the primary reasons for the company missing its estimates, the consultancy said in a report.

Revenue declined to SAR1.19 billion, down 15 percent year-on-year (YoY), in Q4 FY18, missing Al Rajhi's estimate of SAR 1.29 billion.

Domestic revenue fell 20 percent YoY.

"Moreover, we expect the near term margins to remain pressurized on the back of consumers’ increasing preference towards value products (as compared to premium products) and the ongoing restructuring in the business," the report noted.

However, the long-term outlook remains positive, as Al Rajhi Capital expects the retailer to turnaround on the back of persistent improvement in the international business; reduction in non-profitable stores; diversifying the portfolio of products (cosmetics, electronics) and uptick in its online sales.

The consultancy recommended an overweight rating on the stock with a price target of SAR 27 per share.