Thursday, 25 July 2024

Cenomi Retail’s losses increased by 171.3% during Q1 to 151.7 million riyals

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Fawaz Abdul Aziz Al Hokair and Partners Company (Cinomi Retail) revealed that the net loss during the first quarter increased to 151.7 million riyals, compared to 55.9 million riyals in the same quarter of last year, by 171.3%. This came after today’s announcement of the preliminary financial results for the period ending on March 31. 2024 (three months).

The operating loss amounted to 29 million riyals in the first quarter, compared to a profit of 28.9 million riyals in the same quarter of the previous year.

The company also recorded a decline in revenues by a percentage during the first quarter, reaching 1.32 billion riyals, compared to 1.33 billion riyals in the same quarter of last year.

The loss per share in the current period reached 1.32 riyals, compared to 0.48 riyals in the same period last year.

The company’s revenues stabilized in the first quarter of 2024 at 1,329.8 million Saudi riyals. The company’s international retail revenues improved from 243.5 million Saudi riyals to 269.0 million Saudi riyals, a growth rate of 10.4%. Retail revenues in Saudi Arabia contracted by 2.0% to SAR 974.5 million due to the holiday season during Ramadan, geopolitical tensions, store closures, and seasonal inventory price reductions. Exiting franchises and closing stores resulted in a decline in food and beverage revenues by 7.1%, reaching SAR 86.5 million.

“Cenomi Retail” recorded a net loss of 151.7 million Saudi riyals in the first quarter of 2024 (the three months ending on March 31, 2024), compared to a loss of 55.9 million Saudi riyals in the first quarter of 2023 (the three months ending on March 31, 2023). This result can be attributed to:

  • An increase in the cost of revenues, as expenses increased by 3.2% from 1,174.8 million Saudi riyals in the first quarter of 2023 to 1,212.6 million Saudi riyals in the first quarter of 2024, and despite the decrease in rent expenses, salaries and other expenses, such as public utility services and maintenance, Cost of sales increased by 7.9% as a result of geopolitical tensions in December 2023, impacting sales of Zara and other brands in the Inditex portfolio.
  • Net financing costs increased by 27.9% to SAR 93.5 million compared to SAR 73.1 million for the same period in 2023. Financing cost on loans and borrowings increased by 2.78%, but a greater increase in financial income/(cost) on derivative investments by 596.5%, and the financing cost on leasing obligations by 29.16% affected the net financial expenses.
  • An increase in losses resulting from discontinued operations, as losses resulting from discontinued operations tripled to reach 17.2 million Saudi riyals in the first quarter of 2024, compared to a loss of 5.6 million Saudi riyals in the same period in 2023. This increase is mainly due to Selling franchises for 16 brands to Al-Othaim Investment Company.
  • Decrease in other operating income Other operating income decreased by 13.3% to reach 49.7 million Saudi riyals in the first quarter of 2024, compared to 57.3 million Saudi riyals in the same period in 2023.
  • Increase in zakat and income tax expenses. These expenses increased in the first quarter of 2024 to reach 11.8 million Saudi riyals, compared to 4.4 million Saudi riyals for the same period in 2023.

Revenues increased in the first quarter of 2024 by 1,329.8 million Saudi riyals, compared to revenues of 1,011.4 million Saudi riyals in the fourth quarter of 2023 (the three months ending December 31, 2023), a difference of 31.5%.

Retail revenues in Saudi Arabia increased by 55.0% from 628.8 million Saudi riyals to 974.5 million Saudi riyals due to Ramadan sales,

International retail revenues decreased from 291.8 million Saudi riyals to 268.9 million Saudi riyals, by 7.9%. Food and beverage revenue sales decreased from 90.8 million Saudi riyals to 86.5 million Saudi riyals, by 4.8%.

“Cenomi Retail” recorded a net loss of 151.7 million Saudi riyals in the first quarter of 2024 (the three months ending on March 31, 2024), compared to a loss of 1,023.7 million Saudi riyals in the last quarter of 2023 (the three months ending on December 31, 2023). A difference of 85.2%. This result can be attributed to:

  • In the first quarter of 2024, although the value of sales increased from SAR 1,011.4 million to SAR 1,329.8 million by 31.5%, there was an increase in cost of revenues by 31.5%, which affected the gross margin to 8.8%. Also, the operating loss was much lower than the previous quarter at 96.6% (given that the previous quarter witnessed exceptionally high costs of 772 million Saudi riyals), and financial charges increased by 61.0%.

Based on our examination, nothing has come to our attention that causes us to believe that the attached interim condensed consolidated financial statements are not prepared, in all material respects, in accordance with International Accounting Standard No. (34) approved in the Kingdom of Saudi Arabia.

Material uncertainty related to going concern

We draw attention to Note No. (3.2) in the attached interim condensed consolidated financial statements, which indicates that the group incurred a net loss of 152 million Saudi riyals during the year ending on March 31, 2024 AD, and on the same date the accumulated losses amounted to 1,556 million Saudi riyals. In addition, the Group’s current liabilities exceeded its current assets by 3,056 million Saudi riyals as of March 31, 2024. These events or circumstances, along with other matters disclosed in more detail in Note No. (3.2) in the attached condensed consolidated interim financial statements, indicate the existence of a material uncertainty that may raise significant doubt about the Group’s ability to continue as a going concern. Our conclusion has not been modified regarding this matter.

Something else

We would like to draw attention to Note No. (19) of the attached interim condensed consolidated financial statements of the Group, which shows that the interim condensed consolidated financial statements of profits or losses, comprehensive income, changes in equity, and cash flows as of and for the three-month period ending on March 31 2023 AD, has been modified.

Highlights of operational results

During this period, Cenomi Retail opened four stores in the fashion sector and closed 266 stores in the Kingdom of Saudi Arabia, bringing the total number of its stores at the end of this period to 562 stores, which represents a decrease of 38.1% on an annual basis. In its international markets, the company opened eight stores in the fashion sector in Jordan and Uzbekistan and closed 26 stores, bringing the total number of its international stores by the end of the quarter to 249 stores, which represents a decrease of 17.8% on an annual basis. Moreover, the company reduced the number of brands in its portfolio by 23%, and today it owns 57 brand franchises compared to 74 brands in the first quarter of 2023.

The first-tier and leading brands in the Cenomi Retail portfolio maintained their strong performance; In the first quarter of 2024, the value of Zara’s like-for-like sales increased by 1.1%, while the value of sales of other brands within the “Index” portfolio decreased by 3.1% compared to other brands of Cenomi Retail, which decreased by 28.4%. %

In the food and beverage sector, Cenomi Retail opened five stores for brands such as Cinnabon, Subway, and Jamba, and closed eight stores, a decrease of 1.2% year-on-year. The company ended the first quarter with 251 food and beverage stores. The company’s like-for-like sales value in the first quarter of 2024 also decreased by 10%.

First quarter announcements

On March 31, 2024, “Cenomi Retail” announced the signing of an agreement to amend the share purchase agreement dated 07/15/1444 AH (corresponding to 12/06/2023 AD) with Abdullah Al Othaim Fashion Company in order to sell the franchise rights for 5 trademarks: “Aldo”, And “Aldo Accessories”, “Charles & Keith”, “Pedro”, and “Le Vie en Rose” as part of its transformation strategy.

On March 31, 2024, Cenomi Retail also announced the Board of Directors’ recommendation to reduce the company’s capital and its approval of a program to sell non-essential brands.

Subsequent announcements

On April 18, 2024, Cenomi Retail announced the results of the Extraordinary General Assembly Meeting (first meeting).

On May 7, 2024, Cenomi Retail announced the resignation of a member of the Board of Directors.

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