Al Hokair’s Q3 income misses estimates on weak sales: NCBC

Al Hokair reported a net income of SAR 10 million in the third quarter (Q3) of 2018, missing NCB Capital (NCBC) and market expectations of  SAR 68.3 million and SAR 45.8 million respectively.

“The deviation in earnings is attributed to weak sales, gross margin contraction and higher other expenses,” the brokerage firm said in the earnings review.

Sales declined 15.3 percent year-on-year (YoY) to SAR 1.2 billion, which is around eight percent lower than NCBC’s estimates.

“The decline in sales was due to the closure of loss making stores and lower retail spending as a result of the expat exodus. The firm closed 179 stores over the past year and plans to close a further of 50 stores by June 2019,” the report said.

Gross margins contracted 33 bps yoy to 19.6 percent in Q3, coming lower than the NCBC estimates of 22 percent.

NCBC remains ‘neutral’ on Al Hokair with a price target of SAR 30.5.

“The net closure of stores is a key risk on the top-line growth prospects of Al Hokair. However, the cost optimization measures and the growth potential of Aleph, the authorized distributor of Apple, are key positive catalysts going forward,” the report stated.