Saudi retailer looks to World Cup, online sales to counter VAT

DUBAI: Retailer United Electronics Co, the second-best performing Saudi Arabian stock of 2017, is looking to increased demand for televisions before this year’s soccer World Cup, expanded consumer credit and rising online sales to counter any slowdown caused by the start of value-added tax.

The company, known as eXtra, plans to open new stores in 2018 as it seeks to extend a return to profitability into 2018, chief executive officer Mohamed Galal said in an interview. First-quarter sales may be “very soft” after the Jan 1 introduction of VAT, “but activity should pick up in the second half,” he said.

The company’s shares rose as much as 5.3% in Riyadh yesterday after the retailer announced a profit of 140.1 million riyals (US$37.4mil) last year, compared with a loss in the previous 12 months.

Its shares gained 109% in 2017, the second-best performance among the 179 members of the benchmark Tadawul index.

Effect of the introduction of new tax on sales would be recognised “in the next few months,” Galal said.

Saudi consumers are in a “waiting mode” when it comes to spending, as they assess the impact of price increases on their monthly budgets. Caution prevails, even after the government said it will give handouts to offset blows to households from the new tax and an increase in gasoline and utility prices this year, he said. The second quarter should be better for eXtra, boosted by sales tied to the holy month of Ramadan and the World Cup in Russia. — Bloomberg