The Chalhoub Group, one of the biggest luxury retailers in the Middle East region, is forecasting a pick-up in sales in 2018 after a lacklustre 2017 on the back of high oil prices, government spending and faster economic growth, its co-chief executive said.
Patrick Chalhoub said the company achieved one percent sales growth in 2017, describing last year “as gloomy”. The Chalhoub Group, whose franchises include Louis Vuitton, Christian Dior and Fendi, is forecasting sales of around 2 per cent for 2018.
“Plus 1 or 2 is not very much,” said Mr Chalhoub. “We have been perhaps spoiled for many years by double digit growth but finally we are entering into a new era.”
The luxury retail market in the UAE and wider Arabian Gulf region has been hit by the economic slowdown sparked by low oil prices and job cuts. In the UAE, a strong dollar in the past years dented sales as items became expensive for tourists from countries such as China and Russia.
The Middle East’s luxury market grew only 1 per cent due to economic uncertainty, compared with a global growth rate of 5 per cent to an estimated €1.2 trillion, thanks to a greater number of purchases from Chinese citizens, according to a report by consultancy Bain. Globally, the consultancy is projecting a compound annual growth rate of 4 to 5 per cent over the next three years, with the personal luxury goods market alone reaching €295–€305 billion by 2020, from the record of €262bn in 2017.
A weaker dollar, higher oil prices and stronger economic growth, spurred by higher government spending, is set to help the luxury market recover in 2018, although the pre-2014 double-digit growth is unlikely to be replicated anytime soon, Mr Chalhoub said. However, the introduction of 5 per cent value-added tax in the UAE and Saudi Arabia could dampen sales.
“It has been the most interesting, less rewarding period of our group these last two years,” said Mr Chalhoub.
“When you are swept by the wave you accumulate a lot of inefficiencies and you live in your comfort zone. Now that we are confronted with a tough market situation we have to become better, more efficient more, more creative.”
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Read more:
Exclusive: Luxury major Chalhoub partners with Farfetch to take on the Middle East's online luxury retail market
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While the company is cutting costs in the back office, it is investing in other areas, including the digital space to drive more sales.
This is in line with global trends.
While wholesale remains the biggest channel for personal luxury goods, representing two-thirds of sales, the e-commerce space surged 24 per cent in 2017, to account for 9 per cent of the market.
The Middle East region is not quite there yet.
This potential room for growth incentivised the Chalhoub Group to strike a partnership with UK-based Farfetch to help it secure a larger slice of the Middle East’s $8 billion luxury retail market, where less than one per cent of sales are conducted online.
Chalhoub said in February it had entered into a joint venture agreement with Farfetch that will allow the Dubai-based company to feature some of its brands on its partner’s online platform.
“Ecommerce will develop 25 and 30 per cent year-on-year and faster into luxury,” said Mr Chalhoub.
“So we have to adapt to our customer and not our customer adapt to us.”
Brief scores:
Juventus 3
Dybala 6', Bonucci 17', Ronaldo 63'
Frosinone 0
Company%C2%A0profile
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How green is the expo nursery?
Some 400,000 shrubs and 13,000 trees in the on-site nursery
An additional 450,000 shrubs and 4,000 trees to be delivered in the months leading up to the expo
Ghaf, date palm, acacia arabica, acacia tortilis, vitex or sage, techoma and the salvadora are just some heat tolerant native plants in the nursery
Approximately 340 species of shrubs and trees selected for diverse landscape
The nursery team works exclusively with organic fertilisers and pesticides
All shrubs and trees supplied by Dubai Municipality
Most sourced from farms, nurseries across the country
Plants and trees are re-potted when they arrive at nursery to give them room to grow
Some mature trees are in open areas or planted within the expo site
Green waste is recycled as compost
Treated sewage effluent supplied by Dubai Municipality is used to meet the majority of the nursery’s irrigation needs
Construction workforce peaked at 40,000 workers
About 65,000 people have signed up to volunteer
Main themes of expo is ‘Connecting Minds, Creating the Future’ and three subthemes of opportunity, mobility and sustainability.
Expo 2020 Dubai to open in October 2020 and run for six months
Ain Dubai in numbers
126: The length in metres of the legs supporting the structure
1 football pitch: The length of each permanent spoke is longer than a professional soccer pitch
16 A380 Airbuses: The equivalent weight of the wheel rim.
9,000 tonnes: The amount of steel used to construct the project.
5 tonnes: The weight of each permanent spoke that is holding the wheel rim in place
192: The amount of cable wires used to create the wheel. They measure a distance of 2,4000km in total, the equivalent of the distance between Dubai and Cairo.
'Saand Ki Aankh'
Produced by: Reliance Entertainment with Chalk and Cheese Films
Director: Tushar Hiranandani
Cast: Taapsee Pannu, Bhumi Pednekar, Prakash Jha, Vineet Singh
Rating: 3.5/5 stars
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Avengers 3: Infinity War: an American superhero film released in 2018 and based on the Marvel Comics story.
Sholay: a 1975 Indian action-adventure film. It follows the adventures of two criminals hired by police to catch a vagabond. The film was panned on release but is now considered a classic.
Lucifer: is a 2019 Malayalam-language action film. It dives into the gritty world of Kerala’s politics and has become one of the highest-grossing Malayalam films of all time.
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Company profile
Name: Dukkantek
Started: January 2021
Founders: Sanad Yaghi, Ali Al Sayegh and Shadi Joulani
Based: UAE
Number of employees: 140
Sector: B2B Vertical SaaS(software as a service)
Investment: $5.2 million
Funding stage: Seed round
Investors: Global Founders Capital, Colle Capital Partners, Wamda Capital, Plug and Play, Comma Capital, Nowais Capital, Annex Investments and AMK Investment Office
The specs
Engine: 4.0-litre, six-cylinder
Transmission: six-speed manual
Power: 395bhp
Torque: 420Nm
Price: from Dh321,200
On sale: now
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
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UAE currency: the story behind the money in your pockets
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
The biog:
From: Wimbledon, London, UK
Education: Medical doctor
Hobbies: Travelling, meeting new people and cultures
Favourite animals: All of them
