Americana opened 143 stores in Saudi Arabia in 2023; revised openings plan: CEO

Americana Restaurants International PLC opened 143 stores in Saudi Arabia during 2023, out of 300 gross new stores (252 net new stores), as part of its expansion plans, CEO Amarpal Singh Sandhu said during the investor meeting to discuss Q4 2023 financials.

Despite geopolitical tensions affecting business in Q4, Americana demonstrated resilience as it achieved year-on-year (YoY) revenue growth of 1.5% as a result of discipline.

The capital expenditures were in line with Americana estimates for 2023, representing 7% of revenues, indicating a healthy balance sheet and a strong overall financial position.

He pointed out that the company placed growth as a top priority, while strengthening its presence in current markets, driving revenue enhancement, and boosting market share.

Americana reviewed the number of branches planned to open during 2024, with net new stores to range between 200 and 225.

The company will strategically reassess its expansion guidance towards countries that witnessed a lower impact due to the geopolitical repercussions, while allowing time for markets to recover and stabilize throughout the year.

Sandhu expected that gross margins during 2024 to be better than 2023, supported by commodity prices and effective inventory management.

The strong balance sheet provides a solid foundation to support growth plans and investment initiatives, with abundant liquidity and financial resilience.

He pointed out that the company is well placed to pursue growth opportunities while maintaining financial discipline and wisdom.

It continues to explore inorganic opportunities that are consistent with the company’s strategic objectives, encouraging it to enter new markets or sectors and enhance its position and market share.

Americana’s Chief Financial Officer (CFO) and Chief Growth Officer (CGO), Harsh Bansal, said that the repercussions of geopolitical tensions in the region varied negatively from one country to another, as the UAE, Saudi Arabia, Iraq, and Kazakhstan were the least affected in Q4. These countries represent between 60-65% of the company’s business and are expected to recover faster.

In 2023, Kazakhstan showed very healthy performance, while Kuwait and Qatar were medium-impact markets for Americana.

Oman and Jordan, which did not represent a large share of the company's business, were most affected during the quarter. These markets are expected to take longer time to normalize.

Bansal said that Egypt remains a major market for the company despite the macroeconomic situation and lower consumer spending on negative sentiment following geopolitical tensions, indicating that the company is still focusing on Egypt to overcome the ongoing difficult circumstances.

Kuwait and Qatar staged the strongest recovery for Americana, with the support of the KFC chain.

It is difficult to set a timetable for a full recovery amid uncertainty, Bansal pointed out, expecting the recovery to extend during the next few quarters.

Americana’s profitability was negatively affected in Q4 by lower revenues, as the company took proactive measures, through working with suppliers, mitigating franchise, and rationalizing controllable spending to reduce the impact on profitability.

Regarding the board’s recommendation to distribute one-time dividends, the CFO said that the recommendation indicated a commitment to returning surplus cash to shareholders through dividends unless it is allocated for general corporate purposes.