Middle East luxury market outperforms global industry rate, says Chalhoub Group president

Middle East luxury market outperforms global industry rate, says Chalhoub Group president
Patrick Chalhoub says the Middle East has “one of the highest growth rates in the world” for such a small market. (SUPPLIED)
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Updated 26 March 2024
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Middle East luxury market outperforms global industry rate, says Chalhoub Group president

Middle East luxury market outperforms global industry rate, says Chalhoub Group president

DUBAI: Leveling off in July 2023 and returning to normal on a global scale after a spike in consumption following the COVID-19 pandemic, the luxury market is currently witnessing “challenges requiring more collaborations among retailers, brands, developers, and between the private and public sector,” said Patrick Chalhoub, Chalhoub Group president, in an interview with Arab News en Franҫais.

“We recovered quickly post COVID-19 and in 2021, luxury grew at a rate of 10-15 percent compared to 2019,” he added.

In 2022, the market grew by 20 percent, while in 2023, it recorded a 15 percent growth rate during the beginning of the year, before slowing down to a more normal growth rate of 7-10 percent during the fourth quarter for an overall growth of 11 percent.

Going forward, the trend is expected to be in line with rates seen at the end of 2023, with 6-8 percent in fashion and 10-12 percent in beauty, driven by an increased interest in skin care.

The Middle East, said Chalhoub, has “one of the highest growth rates in the world” for a market that only represents 3-4 percent of the worldwide market, growing at 4-5 percent.

There is a continued appetite for luxury and a renewed interest in the jewelry and watch segment, distinct from “revenge buying,” characteristic of the 2021 and 2022 consumption patterns.

“We feel more price sensitivity and a lesser gap in prices, which existed due to currency fluctuations. Today, customers are staying aware of pricing and are much more knowledgeable,” he added.

The share of wallet in luxury consumption diminished over the past years, with spending shifting toward travel, entertainment, and hospitality, particularly in Saudi Arabia.

The conflict in Gaza further triggered a slowdown in luxury spending due to an increased focus on humanitarian affairs since October 2023 and a slower events calendar compared to the same period last year.

Despite the current market environment, an appreciation for luxury for its own value — rather than luxury as a purchasing power tool — is emerging and is being felt further during the Ramadan season, driven by sustainable consumption and well-being.

“Consumers ask about the purpose of the brand and its sustainability in an active attempt to buy with purpose,” Chalhoub said.

“It makes our business more challenging but more sustainable in the long run. Less festive, more personal shopping, reassured by the brand but not to show off,” he added.

While e-commerce is still developing at a fast rate owing to its convenience, brick-and-mortar shops, which offer personal connection and engagement with customers, are making a comeback with retailers delivering quality service and unique experiences.

This is the objective of “The Visitor,” a new travel retail concept launched by the Chalhoub Group at King Abdulaziz International Airport in Jeddah in November 2023.

“The potential in Saudi Arabia is tremendous and evolving, not only in the Jeddah airport, which presents a huge opportunity owing to the traffic and customer loyalty,” Chalhoub said.




“The Visitor,” a new travel retail concept launched by the Chalhoub Group at King Abdulaziz International Airport in Jeddah in November 2023. (Supplied)

The project, in collaboration with the Jeddah Airport Authority, offers a world-class customer experience and leverages the Chalhoub Group’s knowledge of the market, consumer proximity, and experience in operating regional duty frees, supplying travel retail, and upskilling resources to meet the demand’s requirements and the disruption brought by new technologies, like artificial intelligence.

“I am satisfied with the initial results, in terms of layout, understanding the customer, product mix and offering … The finished product will be seen by early 2025,” he added.

The Middle East is home to a large young customer base “with an ability to spend on luxury, digitally connected, eager to learn and assert itself,” Chalhoub said.

The customer experience starts with the attractiveness not only of the shopping mall and the high street but also of the digital aspects. The objective is to inspire and engage customers digitally, which requires stronger collaborations, “key to deliver the kind of experience and journey which our customers are trying to get especially in the Kingdom,” Chalhoub said.

Maintaining price competitiveness, fighting against counterfeits, and mitigating the impact of supply chain disruptions are also key.

With new malls opening in the region — Marasi in Bahrain (February 2024) and Solitaire in Riyadh (expected in 2024) and Abu Dhabi (2025) — “there is a number of projects coming to the market, offering a better customer journey, and better collaboration between the various stakeholders,” Chalhoub said.

The group has taken initiatives to create incubators and accelerators for startups, encouraging research and innovation and an entrepreneurial mindset among its teams.

“The world is changing; the consumer is more empowered … We need to be forward-looking while remembering our values as a group centered around teamwork, inclusivity, and innovation,” he added. 




“Parfum d'Orient,” an exhibition tracing the story of Oriental perfumes and depicting the dialogue between heritage and contemporary works. (Paris - Supplied)

The Chalhoub Group celebrates its 70th anniversary this year, and as it witnesses changes in the region and embraces both opportunities and challenges, it continues to shape the luxury landscape by bringing international names to the region and exporting its local expertise.

“Parfum d’Orient,” an Institut du Monde Arabe exhibition in partnership with the Chalhoub Group, several French partners, Christofle and Ghawali, portrays the Arabic origin of fragrances, inspired by the souqs of Jeddah.

“A transformative exhibition, tracing the origin of some of the scents from Arabia, (such as) oud, saffron, and roses from Damascus. Beyond the olfactory (aspect), there’s a sense of pride in identifying with the sources of these products,” said Chalhoub.

The six-month exhibition, which ended in Paris on March 17, will be moving to Riyadh in October 2024 for a second phase in collaboration with the Saudi Ministry of Culture.


Mobily partners with Telecom Egypt to launch 1st Saudi submarine cable

Mobily partners with Telecom Egypt to launch 1st Saudi submarine cable
Updated 18 sec ago
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Mobily partners with Telecom Egypt to launch 1st Saudi submarine cable

Mobily partners with Telecom Egypt to launch 1st Saudi submarine cable

RIYADH: Saudi Arabia’s telecommunications company, Mobily, has entered into a cooperation agreement with Telecom Egypt to establish the first Saudi-owned subsea cable connecting the two nations across the Red Sea.

The agreement includes the installation of the subsea cable, which will be fully owned by Mobily, with landing stations in Duba, Saudi Arabia, and Sharm El-Sheikh, Egypt, as stated by Mobily on X.

This cable will serve as a link between Asia and Africa, creating a route to Europe by connecting Saudi Arabia with Egypt.

It will enhance connectivity options for Gulf countries and neighboring regions through Mobily’s digital network, integrating with Egyptian landing stations in the Mediterranean.

Additionally, it will provide new routes to improve service reliability and meet customer needs within the Kingdom and beyond.

“The new cable represents a significant milestone in strengthening Saudi Arabia's position as a leading international hub for telecommunications services and data traffic, in alignment with the goals of Saudi Vision 2030,” said Salman bin Abdulaziz Al-Badran, CEO of Mobily.

He added: “The signing of the agreement underscores our commitment to expanding our infrastructure and enhancing our capabilities both regionally and internationally, as Mobily’s new cable will connect Saudi Arabia to Egypt and improve communication flexibility between the Middle East and Europe.”

This agreement aligns with Mobily’s strategy to bolster its infrastructure and network capabilities. Building on its previous investments in subsea cables that connect global regions, the new cable will expand Mobily’s international reach and capacity.

“Complementing the newly established landing station in Sharm El-Sheikh, we are developing new crossing routes to connect Sharm El-Sheikh to the Mediterranean Sea,” stated Mohamed Nasr, managing director and CEO of Telecom Egypt.

He further said: “We are confident that this commercial agreement will be a valuable addition to our ongoing efforts to support this critical sector and cater to the rising demand for capacity and connectivity.”

By increasing capacity and expanding its global reach through new collaborations, Mobily is dedicated to enhancing its subsea network infrastructure both domestically and internationally.

“I am pleased with our cooperation with Telecom Egypt, which will enable us to offer the best services to all our customers around the world,” Al-Badran noted.

“Telecom Egypt is dedicated to advancing the international telecommunications infrastructure by enhancing the geographical diversity of the global subsea cable networks,” Nasr added.

This commitment aims to provide cutting-edge digital solutions to customers and support the sustainable growth of the Kingdom’s ICT sector through advanced infrastructure.


Saudi Arabia, Turkiye sign 10 cooperation agreements at business forum in Istanbul 

Saudi Arabia, Turkiye sign 10 cooperation agreements at business forum in Istanbul 
Updated 19 min 32 sec ago
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Saudi Arabia, Turkiye sign 10 cooperation agreements at business forum in Istanbul 

Saudi Arabia, Turkiye sign 10 cooperation agreements at business forum in Istanbul 

RIYADH: Saudi Arabia and Turkiye deepened commercial ties by signing 10 cooperation agreements at an event in Istanbul, advancing strategic initiatives across diverse sectors. 

The Saudi-Turkish Business Forum spotlighted opportunities for joint ventures in agriculture, food, and tourism, along with potential collaborations in advanced manufacturing, construction, and infrastructure. Other key areas included technology, innovation, and logistics, the Saudi Press Agency reported. 

Organized by the Federation of Saudi Chambers and the Foreign Economic Relations Board of Turkiye, the event attracted over 450 companies and several government agencies from both nations. 

This comes as the trade volume between the Kingdom and Turkiye reached SR25.4 billion ($6.76 billion) in 2023, marking a 15.5 percent growth. Saudi exports to Turkiye represented SR15.6 billion, while Turkish imports to the Kingdom accounted for SR9.8 billion.  

Turkish Minister of Trade Omer Bolat said: “Turkiye aims to raise the volume of its bilateral trade with the Kingdom to $30 billion in the medium and long term, and diversify its fields, especially tourism, health, infrastructure, information technology, and the defense industry.”  

The minister praised the strong bilateral relationship, the quality of Turkish products, and the success of the his country’s services sector, encouraging mutual benefit from these strengths. He also highlighted the Kingdom’s transformations across sectors such as mining, health, technology, and communications. 

“Today in Istanbul, I met with my brother, His Excellency the Turkish Minister of Trade Omer Bolat, and we discussed strengthening relations and expanding trade partnerships for the good and interest of the two brotherly countries,” Saudi Minister of Commerce Majid bin Abdullah Al-Qasabi said in a post on X. 

  


SABIC sees turnaround as it reports $266.2bn Q3 profit

SABIC sees turnaround as it reports $266.2bn Q3 profit
Updated 15 min 37 sec ago
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SABIC sees turnaround as it reports $266.2bn Q3 profit

SABIC sees turnaround as it reports $266.2bn Q3 profit

RIYADH: Petrochemical firm Saudi Basic Industries Corp. reported a net profit of SR1 billion ($266.27 million) for the third quarter of 2024, a marked improvement from a loss of SR2.87 billion in the same period last year.

SABIC attributed its positive results to various factors, including higher income from operations by SR797 million, bolstered by a heightened gross profit margin offset by raised operating costs.

The company’s revenue rose 3 percent year on year to SR36.88 billion, primarily driven by increased average selling prices despite a slight decrease in sales volume.

The firm also benefited from gains related to divesting its Functional Forms business and favorable currency exchange fluctuations.

According to the London Stock Exchange Group, the third quarter profit missed analyst forecasts of SR1.6 billion, as reported by Reuters.

A notable factor was SABIC’s reduced losses from discontinued operations, amounting to SR3.3 billion, mainly stemming from a fair value reassessment of the Saudi Iron and Steel Co., known as Hadeed.

The reclassification of Hadeed as a discontinued operation will continue until the completion of its sale, which was previously announced by the company.

When compared with the second quarter of 2024, however, net profit fell from SR2.18 billion due to a lower gross profit of SR194 million, attributed to softer selling prices and higher feedstock costs.

The quarter also saw a rise in operating expenses by SR223 million and a decline in profits from associates and joint ventures by SR313 million, following a fair value assessment related to the firm’s agreement to sell its shares in Alba, announced in September.

Despite these challenges, SABIC’s total revenue for the first nine months of 2024 reached SR105.28 billion, with a net profit of SR3.43 billion, a sharp turnaround from the SR1.04 billion loss in the same period last year.

This was aided by reduced discontinued operation losses and lower Zakat expenses by SR1.05 billion, stemming from regulatory-driven provision adjustments in June.

In September, Saudi Arabia’s Mining Co. completed the acquisition of SABIC’s 20.62 percent shareholding in Aluminium Bahrain, also known as Alba, marking a significant milestone in its strategy for regional growth.

According to a press statement, the transaction valued between SR3.62 billion ($960 million) and SR3.97 billion.


Saudi Vision 2030 to catalyze banking sector growth: Moody’s

Saudi Vision 2030 to catalyze banking sector growth: Moody’s
Updated 04 November 2024
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Saudi Vision 2030 to catalyze banking sector growth: Moody’s

Saudi Vision 2030 to catalyze banking sector growth: Moody’s
  • Rating agency said development of planned mega projects in Saudi Arabia will play important role in generating huge business and lending opportunities for banks
  • Kingdom’s housing program has been a driver of credit growth for the banks over the last five years

RIYADH: Saudi Arabia’s Vision 2030 program to diversify the economy could accelerate the country’s banking sector development in the coming years, according to an analysis by Moody’s. 

In its latest report, the US-based credit rating agency said the development of planned mega projects in Saudi Arabia will play an important role in generating huge business and lending opportunities for banks. The infrastructure required to host major events like the Asia Cup in 2027, the Asian Winter Games in 2029, Expo 2030, and the FIFA World Cup in 2034 is expected to support this growth further.

Vision 2030 aims to reduce the Kingdom’s decades-long dependence on crude revenues and steadily bolster its presence in other sectors like tourism, technology, and real estate. 

“Planned mega projects to diversify the economy include the tourism, real estate, and infrastructure sectors, and the government provides the country’s banks the opportunity to help fund them,” said Abdulla Al-Hammadi, assistant vice president and analyst at Moody’s Ratings. “One part of Saudi Vision 2030 is a plan to raise home ownership to 70 percent by 2030 from 47 percent in 2016.”

The report said the Kingdom’s housing program has been a driver of credit growth for the banks over the last five years, with household mortgages reaching SR607 billion ($161.67 billion) at the end of 2023, up from SR110 billion in 2016. They now comprise around 24 percent of total banking sector loans.

“Given these mortgages were secured at a fixed rate during a time of low interest rates and that tenures are often for 25 to 30 years, this could place some pressure on margins in the sector. We believe that larger banks will be hit hardest due to their dominant position in the Saudi mortgage market,” said Al-Hammadi. 

If deposit development continues to lag loan growth, banks could also face growing funding shortages. Given the nature of mortgage fixed-rate loans, it may be challenging for financial institutions to offload them in the still-developing secondary markets.

The agency said Saudi banks could also face challenges in this run, which include insufficient deposit growth to meet the growing credit demand associated with Vision 2030 infrastructure and development projects. 

“A challenge is that availability of deposit growth is lagging behind accelerated credit growth at Saudi banks, while the home-ownership push has packed the banks with long-term, fixed-rate mortgages that tie up funds. 

“The banks will need to tap more confidence-sensitive market funding. This could entail foreign deposits, interbank syndications, and debt issuance, particularly Islamic bonds or sukuk,” said Al-Hammadi.

According to the report, reliance on short-term foreign funding will be riskier than long-term, such as senior unsecured debt and additional tier one, since long-term allocations will better match these banks’ long-term loans.


Oil Updates – crude gains more than $1 after OPEC+ delays output hike

Oil Updates – crude gains more than $1 after OPEC+ delays output hike
Updated 04 November 2024
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Oil Updates – crude gains more than $1 after OPEC+ delays output hike

Oil Updates – crude gains more than $1 after OPEC+ delays output hike
  • Brent up 1.9 percent, WTI up 2 percent
  • OPEC+ delays December output hike by one month

BEIJING/SINGAPORE: Oil prices extended gains on Monday, rising more than $1 on a decision by OPEC+ to delay by a month plans to increase output, while the market braced for a week that spans a US presidential election and a key meeting in China.

Brent futures rose by $1.39 per barrel, or 1.9 percent, to stand at $74.49 a barrel by 10:22 a.m. Saudi time. US West Texas Intermediate crude rose by $1.41 a barrel, or 2.0 percent, to stand at $70.90.

On Sunday, OPEC+, which includes the Organization of the Petroleum Exporting Countries plus Russia and other allies, said it would extend its output cut of 2.2 million barrels per day for another month in December, with an increase already delayed from October because of falling prices and weak demand.

The grouping had been due to increase output by 180,000 bpd from December.

“While the delay until January does not change fundamentals significantly, it does potentially leave the market having to rethink the strategy of OPEC+,” ING analysts said in a note.

The delay bucked the expectations of some in the market for OPEC+ to deliver the planned hike in output, they added.

“This delayed supply increase means that maybe the group are more willing to support prices than many believe,” they said.

The group is set to gradually unwind the 2.2-million-bpd cut over the coming months, while another 3.66 million bpd of production cuts will stay until the end of 2025.

Brent and WTI posted weekly declines last week of about 4 percent and 3 percent, respectively, as record US output weighed on prices. But both contracts edged up on Friday on reports that Iran could launch a retaliatory strike on Israel within days.

On Thursday, US news website Axios said Israeli intelligence suggested that Iran was preparing to attack Israel from Iraq within days, citing two unidentified Israeli sources.

It is questionable whether the price uptrend will be sustained as previous initial positive reaction to the delayed output hike and geopolitical tension have eventually fizzled off, said Yeap Jun Rong, a market strategist at IG.

For now, oil prices may stay in a broad consolidation range, with any upside likely to find some resistance at the level of $78.50, he added.

Markets await Tuesday’s US presidential election, with polls showing Democratic Vice President Kamala Harris and Republican former President Donald Trump neck-and-neck.

And on Thursday, economists expect the US Federal Reserve to cut interest rates by 25 basis points.

In China, the Standing Committee of the National People’s Congress meets from Monday to Friday and is expected to approve additional stimulus to boost the slowing economy, though analysts say the bulk may go to help cut local government debt.