Dubai luxury retailer, the Chalhoub Group, on Wednesday said that the slowdown had affected sales in the Mena region.
It claims the group’s sales from the start of the year until the end of April were down 2 per cent compared with the same period.
Chalhoub runs over 600 outlets across 14 countries in the Mena region – running the Level Shoe District in Dubai Mall and Tryano concept store in Yas Mall along with a host of other stand-alone brands.
While the group has seen falling sales at a variety of outlets as the low oil price, the strong dollar and the fall in high-spending visitors from Russia and China played a part in changing consumer sentiment negatively, the group’s chief executive believes this year will finish 6 per cent up on last year.
“In the UAE, this is not a crisis this is just a transition to a mature market,” said Patrick Chalhoub, the co-chief executive of Chalhoub. “This is not 2009, the same stresses are not in the market place with regard to job insecurity and real estate crashing. The slowdown has been running for a while now and retailers have adapted to the strong dollar by making products more similar to European prices and the hotels are 15 per cent cheaper than two years ago, making it a haven for tourists again.”
While Mr Chalhoub saw growth in the short term, he believes that without a concerted effort for UAE retailers to become agile and react to the changing environment, there could be some big losers for retailers and landlords.
“If the malls do not move on their rents then the malls will not be as dynamic as they are today,” he said. “If the economic softness remains and rents do not move then where we usually open 60 stores a year and close 20, we may only open 50 stores and close 40. We may move into department stores rather than have stand alone stores. The super regional malls did not want to move on rents or listen but for the last six months they have started to listen but still haven’t dropped rents.”
Industry analysts, while not as bullish as Mr Chalhoub about short term market conditions, believe that luxury retail was still a strong play in the midterm for the UAE and wider GCC with the absolute luxury providers outstripping growth of all other sectors, with those that looked for sales down the value chain paying the price.
“The midterm outlook for growth in luxury is 4 per cent to 5 per cent, against 12-13 per cent as it use to be,” said Cyrille Fabre, a partner at Bain & Company. “I would say the outlook for 2016 is flat as the market is still reacting to a confluence of negative factors – oil, the dollar, tourism – but medium term growth will be decent. The super regional malls of Mall of the Emirates, Dubai Mall and Yas Mall will have to reduce rent in the medium term as a market can only bear so much. The secondary malls are already reducing rents so the market will become fairer.”
Follow The National’s Business section on Twitter