“Extra” to Arabic: “Facilitation” allocations have compressed profits... and the most difficult stage is over

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CEO of United Electronics Company “Extra” Ali Mansour said that the recent increase in the allocations of the subsidiary “Tas’heel” by about 70 million Saudi riyals, which put pressure on “Extra’s” profits, came within the framework of maintaining the quality of the credit portfolio and adhering to strict credit controls, indicating that the most difficult stage regarding allocations is behind the company.

Mansour added, in an interview with Al Arabiya Business, that “Tas’heel” continues to invest strongly in technology in preparation for launching new products early next year, in a way that supports accelerating the pace of growth and benefiting from the existing demand in the market.

He explained that the retail sector at Extra continued to demonstrate high levels of flexibility and solidity, both in terms of revenues and profitability, despite the challenges that the markets faced during the recent period.

He explained that retail sector sales increased by 5.8% during the third quarter on an annual basis, supported by several factors, most notably an increase in the average shopping basket by about 9%, continued growth in the business sector, in addition to the momentum that accompanied the launch of the new “iPhone” phone.

He pointed out that the sector's profits grew by 10.6% thanks to the improvement in the sales mix and discipline in managing expenses and inventory, in addition to the continued growth in the services sector, which has become one of the most important drivers of profitability for the company.

Mansour said that the business sector does not usually represent more than 3% to 4% of total sales, but it recorded strong growth from a low base, explaining that the company does not focus primarily on corporate sales as much as it focuses on the final consumer, but it benefited from the availability of inventory to seize additional opportunities in this sector.

He added that iPhone sales played an important role in supporting growth during the third quarter, but the strength of Extra lies in the diversity of revenue sources and not relying on one category of products.

He explained that the company's smartphone sales percentage is lower than some competitors in the market, while the diversity of products contributes to achieving greater balance and better sustainability of operational performance.

Regarding the rise in shipping and insurance costs, Mansour said that the company dealt with these challenges early, and worked directly with local and global suppliers to shift the bulk of the pressures to supply chains instead of transferring them to the final consumer.

He added that the cost of shipping one container from China rose from about $1,500 previously to between $10,000 and $11,000, including insurance. However, the company succeeded in absorbing the bulk of this increase, while its impact on the final prices was less than expected.

He pointed out that the company took proactive measures to reduce the impact of supply chain disruptions, by submitting order schedules and increasing planning periods for purchases from 45 days to two or three months, which helped maintain stable inventory levels and provide products without interruption.

Regarding Saudi consumer behavior, Mansour explained that the market witnessed a brief period of anticipation with the onset of geopolitical tensions, before confidence gradually returned during the third quarter.

He added that the Saudi consumer has once again proven his ability to adapt to different circumstances, pointing to a clear change in purchasing behavior represented by the consumer focusing more on specifications and value for price rather than being satisfied with the brand.

He said that this transformation contributed to enhancing the growth of the company's brands, which have now achieved a greater presence in the sales mix, with expectations of their continued expansion during the coming period.

Mansour revealed expansion plans during the fourth quarter, including the opening of a new store in Saudi Arabia, to be followed by another store during the first half of next year, in addition to the opening of two new stores in the Sultanate of Oman.

He added that the company intends to accelerate the growth of its digital platform “Marketplace”, which has moved from the experimental stage to the expansion stage, expecting it to become one of the most prominent growth engines during the coming period.

He also pointed out the imminent commercial launch of a new service specializing in home maintenance, which includes electrical and plumbing work and related services, stressing that the results of the pilot phase were very positive.

Mansour said that the company's future sources of growth will not be limited to geographical expansion, but will also include the digital platform, the services sector, and the “Jood” program, in addition to continuing to develop the customer experience and enhancing solutions and added services.