Lazurde CEO says revenue drop ‘was very much expected’ on COVID-19, retail network to be optimized

The significant decline in Lazurde Company for Jewelry’s revenues was “very much expected”, on the closure of malls and shopping centers in various provinces, where the group generates most of its revenues due to the COVID-19 pandemic, CEO Sélim Chidiac told Argaam in an exclusive.

“After opening in June, we witnessed a swift and strong comeback in revenues. However this positive impact was offset by a one off cost of a decision of recalling some of our products from our wholesales customers to make sure they are stocked with the right products which match the changing consumers’ budget in light of the higher gold price and the increase in VAT,” Chidiac said.

Adjusting for this one-off cost of recall, Lazurde’s net loss for Q2 2020 would have been less by SAR 34.7 million. Despite the negative impact of the recall on Q2 results, it will help in increasing sales and reducing working capital and its related financing cost in the near future.

The rapid gold price increase did impact consumer overall demand in the wholesale business selling gold jewelry by weight. Lazurde launched lighter weight jewelry to avoid the impact of higher ticket price items.

The rise in gold prices did not affect the retail and e-commerce business where the company sells gold jewelry by piece. “It is worth reminding all our stakeholders that the company does not take any positions in gold and therefore is not exposed to any losses or gains due to fluctuations in gold prices,” Chidiac added.

Speaking of the value-added tax (VAT) impact, Chidiac explained that Lazurde has already taken several measures to contain the VAT hike impact on its revenues.

“We have noticed an increase in the sales in the last few days before VAT increase implementation with insignificant impact on our Q2 results. On the other hand, we also had solid retail revenues post VAT increase, driven by promotions, Eid celebrations and also people staying this summer in Saudi Arabia,” he said.

Demand is rapidly growing and we believe that consumers shift to this channel will continue strongly in the future.

Lazurde has 70 points of sales across Saudi Arabia and Egypt for its various brands. The company plans to optimize the retail network, through launching flagship shops for few brands, expanding in certain cities, consolidating other retail point-of-sale (POS) locations and potentially reducing the number of stores of other brands.

The jewelry manufacturer reported net loss after Zakat and tax of SAR 67.8 million for the first half of 2020, versus net profit of SAR 24.1 million in year-earlier period, Argaam reported.