Alsaif Gallery CEO says keeping prices stable 'strategic decision' to boost market share

Muhammad bin Suleiman Alsaif, CEO of Alsaif Gallery

Alsaif Stores for Development & Investment Co. (Alsaif Gallery) did not raise prices or pass over the cost increase to its customers, as the impact of shipping rates is temporary, said CEO Muhammad bin Suleiman Alsaif.

He stated that the company's profit margins can withstand such crises, adding the strategic decision of keeping prices unchanged was taken to increase market share.

In a phone call with Argaam, he explained that the company's success in creating its own brands and its direct relationship with manufacturers enhances its profit margins, which are seldom found among retail companies.

Brand revenue exceeded 80% of the total revenues in 2022. Thus, the company's ability is strong to absorb the effects of rapid changes and crises in the market, the CEO said.

Commenting on the financial results, Alsaif said that profits were mainly reduced by higher cost of sales (COS) due to increased procurement costs amid rising freight rates.

Alsaif Gallery disposed of the high-cost imported goods to receive new goods at their regular price, which was before the pandemic, in 2023.

By the end of Q1 2023, lower freight costs will start to impact profit margins on the return of freight rates to their normal levels, the CEO said.

Alsaif pointed out that freight rates before the pandemic varied between $700 and $1,000 per container, but increased during the pandemic and until the end of August 2022 to reach between $6,000 and $8,500 per container.

Most sectors witnessed changes as global travel and tourism picked up, which impacted purchasing power, as many families resumed travel after two years of travel bans during the pandemic.

The company’s CEO expected an improvement in demand levels during 2023.

The company is accelerating the expansion of its branch network, with two new branches opened in the UAE in Q1 2023. The first branch in Kuwait will be opened in the coming weeks, with the second branch by middle of the second quarter.

The CEO stated that Alsaif Gallery continues to expand locally, expecting to open three branches during the current year.

The company is targeting expansion in e-commerce, but reviews the performance and profitability of the branches periodically, Alsaif said, adding none of the branches are making losses.

Alsaif stressed that the company has paid all bank facilities, and is currently paying to suppliers by direct payment, pointing out that there are no existing bank loans on the company due to the large increase in interest rates.

He said that the company enjoys strong cash flow that enables it to continue distributing profits on a quarterly basis, as the board of directors support the dividend policy, noting that a cash dividend of SAR 1 will be paid for each share for Q4 2022.

According to data compiled by Argaam, Alsaif Gallery reported a decline of 30% in net profit to SAR 129.8 million in 2022, from SAR 184.9 million a year earlier.