Farm Superstores misses Q2 forecasts on weak demand: Albilad Cap

Saudi Marketing Co. (Farm Superstores) reported a bottom line of SAR 20.3 million in Q2 2016 (down 25 percent YoY and 10 percent QoQ), falling shy of Albilad Capital’s estimates of SAR 24 million and analysts’ consensus of SAR 25.7 million, the brokerage said in a note.

This profit miss was impacted by increased costs, expansion plans and decreased demand in general. The brokerage expects to “see the positive financial impact on the profits of the company from the new expansions in farm markets stores and adventures world during H2 2017.”

Net profit for the first half of 2017 retreated 18 percent YoY to SAR 43 million, impacted by promotional offers and discounts, lower sales of high-margin products, higher SG&A expenses in addition to increased non-operating costs as well as financing expenses.

In Q2 2017, the retailing company reported sales of SAR 516.4 million compared to SAR 524.8 million for Q2 2016, a decrease of 1.6 percent. The company increased the number of stores by 10 compared to June 2016. In addition, the number of Adventures World outlets increased from 9 to 11.

Therefore, Albilad Capital recommended a “Neutral” on the stock and downgraded fair value to SAR 31.