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Lulu Retail reports 126% growth in Q3 net profit

Revenues in Q3 2024 reached $1.86 billion, up 6.1% year on year

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

Lulu Retail introduced a total of 12 new stores in the first nine months of 2024 period, with three new stores rolled out in the Q3 2024 period, comprising of three express stores, adding a total of 8,033 square metres during the quarter. Total selling space as at 30 September 2024 was 1.3 million square metres.

Lulu’s Happiness loyalty programme continues to gain strong traction, with the programme now rolled out across all GCC countries, with a total of approximately 5.0 million members at the end of the first nine months of 2024 period.

Post-period, Lulu announced a strategic partnership with Abu Dhabi’s Modon Holding to build retail facilities, including hypermarkets, supermarkets and other retail stores. In addition, Lulu also opened a further five stores taking total stores opened so far in 2024 to 17 stores.

Outlook maintained

Lulu Retail’s growth strategy is focused on four key pillars: Enhancing its existing store network, expanding its store network, driving operational efficiencies and delivering revenue upside through private label and loyalty program expansion. Lulu remains on track to deliver on its 2024 guidance, as communicated at the time of its IPO.

Management Comment

Yusuffali MA, Chairman of Lulu Retail, commented: “It has been a milestone period for our team, with our record listing on ADX and our first set of results as a listed company. The vision and ambition of nations across the GCC is enabling businesses like Lulu to thrive and creating opportunities for growth. The flexibility of our three store format and growing e-commerce presence allows us to grow in diverse communities and to form strong partnerships across the region, as seen with the 12 stores we opened in the first nine months of this year and our recent partnership with Modon Holding. We’re excited to continue our growth journey as a listed company, delivering on the targets we’ve communicated to investors and ensuring Lulu remains where the world comes to shop.”

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.”