Lulu Retail reports 126% growth in Q3 net profit

Lulu Retail on Thursday reported net profit from continuing operations at $35.1 million for the Q3 period, an increase of 126 per cent, driven by improved operating profit and improved cost management. For the nine-month period, net profit from continuing operations improved by 73.3 per cent to $151.5 million.

Revenues in Q3 2024 reached $1.86 billion, up 6.1 per cent year on year. The strong sales performance was driven by significant growth in key markets, including UAE, Saudi Arabia and Kuwait, with sales growth across key product categories, including double-digit growth in fresh food and mid to high single-digit improvement in electrical goods.

Like-for-like (LFL) sales in Q3 2024 increased by 1.2 per cent to $1.7 billion, while LFL sales for first nine months of 2024 increased by 2.2 per cent to $5.3 billion.

The UAE saw strong revenue growth of 7.5 per cent in Q3 2024, mainly driven by healthy LFL growth of 4.7 per cent during the quarter and the benefit of strong market tailwinds in the region. Three new stores were opened in the first nine months of 2024 period.

Revenue in Saudi Arabia grew by 5.7 per cent to $369.3 million in Q3 2024, driven by an improvement in Lulu’s fresh food offer, as it tailored its product mix to cater to the growing demand for fresh products in the Kingdom. Five new stores were opened in Saudi Arabia in the first nine months of 2024 period, including two hypermarkets, two express stores and one mini market.

Oman, Kuwait and Bahrain all achieved robust revenue growth, with Qatar delivering stable revenue and maintaining its leading market share position.

Omnichannel remains a key focus area for Lulu, with e-commerce sales increasing to $237.4 million during the nine-month period, up 83.5 per cent year on year. E-commerce sales now constitute 4.3 per cent as a percentage of total retail sales.

Earnings before interest, taxes, depreciation and amortisation (Ebitda) in Q3 2024 was $176.3 million, up 9.9 per cent year on year, with an Ebitda margin of 9.5 per cent, a c.30-basis point improvement year on year. The strong Ebitda performance was driven by gross margin expansion of c.130 basis points in Q3 2024, enabled by an improvement in Lulu Retail’s product mix and an increase in sales across higher margin categories, including private label products, which now represent 29.3 per cent of total retail sales compared to 28.6 per cent in Q3 2023. Lulu’s private label products span fresh food, consumer packaged goods, lifestyle products and electrical goods.

Capital expenditure (for continuing operations) totaled $98.5 million during the first nine months of 2024 period, constituting 1.7 per cent of total sales. Capex was primarily invested in the opening of 12 new stores, including five in Saudi Arabia and three in the UAE, Lulu’s two largest markets. Capex as per cent of sales was 1.7 per cent for first nine months of 2024 as compared to 1.9 per cent for first nine months of 2023. This was on account of lower store openings and a gradual shift towards asset light model that requires less capex.

Net debt as at September 30, 2024 totalled $2.54 billion, representing net debt/Ebitda of 3.2x on an IFRS-16 basis. Net debt/Ebitda excluding leases remained stable at 1.4x, with the company in a strong position to continue investing in growth.

Store and loyalty expansion

Saifee Rupawala, Chief Executive Officer of Lulu Retail, commented: “The third quarter and nine-month period were marked with ongoing revenue and profit growth across our business, driven by sales growth across our six GCC markets, strategic expansion in higher margin segments like Private Label and through investment in operational efficiencies and customer-focused engagement. Our Happiness Loyalty Program continued its strong momentum with 5.0 million members by the end of Q3 – a remarkable achievement given it was only launched in January 2023. The program provides valuable data insights for our teams that are driving sales and repeat purchase across the Group. We are encouraged by the growth we have seen in the business and are pleased to reiterate our guidance for the 2024 period, with the fourth quarter seasonally stronger, supported by promotional campaigns and higher footfall given the holiday period.”