Union Coop plans move into Abu Dhabi

Company reported 16% fall in net profit earlier this week

  
A Union Coop hypermarket.

A Union Coop hypermarket.

Union Coop/handout via Thomson Reuters Zawya

Union Coop, the largest cooperative retail group in the United Arab Emirates (UAE), is planning to expand outside its home emirate of Dubai, its CEO has said.

Khalid Humaid Bin Diban Al Falasi said the Coop has gained approval from the authorities to expand outside Dubai.

“We have got the approval to expand outside Dubai, which is big news for our shareholders. We would be collaborating with local governments in this regard,” he said during a press conference announcing the company’s 2018 annual results on Tuesday.

Union Coop will target Abu Dhabi as the first emirate for expansion, he disclosed.

“We are still looking for land in Abu Dhabi. But it is a big market and we are working on a plan,” he said.

The estimated population of Abu Dhabi emirate was three million in mid-2016, according to Abu Dhabi Statistics Centre.

Al Falasi told Thomson Reuters Projects on the sidelines that the stores outside Dubai could be run under another brand.

“The stores could either be under the Union Coop brand or another brand created by us, but it would depend on the marketing strategy that we would use,” he said.

He said the Coop preferred to rely on its cash flow than bank loans to finance its projects.

“We not only make profits but also build assets, and we also manage with our cash flow. We have 17 projects planned for this year, and all of these would be financed by us (rather) than through banks,” he said.

The Coop has more than a billion dirhams ($272.25 million) in cash in the bank, he added.

During the press conference, he said that despite the challenges facing the retail sector in the UAE, Union Coop has maintained a strong position in the market and its development plans reflect its sound financial status.

“We have on our Tamayaz loyalty programme close to 700,000 members that no other Coop has,” he said.

The Union Coop CEO also disclosed that it will open a wholesale store in Dubai in March this year to facilitate bulk purchases, adding that the store would be open to end-consumers as well.

In its results announced on Tuesday, Union Coop’s 2018 net profit fell by nearly 16 percent to 466 million UAE dirhams ($127 million) compared to 539 million dirhams in 2017.  For the same period, sales declined by almost nine percent to 2.3 billion dirhams, compared to 2.5 billion dirhams in 2017.

In 2018, the number of shareholders rose by 8.4 percent to 33,527 while shareholders' equity increased 12 percent to nearly 2.8 billion dirhams ($773.8 million)

Falasi told Thomson Reuters Projects that the cooperative plans to distribute its entire 466 million dirham net profit as dividends to shareholders in 2018. In 2017, it distributed 394 million dirhams or 73 percent of the net profit as dividend, according to a March 2018 press statement.

Officially online

Meanwhile, Union Coop’s Business Strategy and Corporate Development Director said the coop will officially launch a full-fledged webstore by the end of next month.

“We were partnering online market places like Souq, Noon and El Grocer but now we are launching our own webstore by the end of March,” Chopra said during the press conference. 

She said the portal is currently in a testing phase with customers.

“We are very confident about the webstore considering that we have a strong offline presence, and moreover, the average basket that we could generate in the testing phase was bigger than what we could do through our partners,” she said.

She told Thomson Reuters Projects that the coop would continue to work with existing online partners.

"We want to increase our visibility so that you will see (the company) everywhere, online or offline.  Additionally, we aim to cover the entire UAE and it won’t be limited to Dubai,” she added.

In December last year, Union Coop had announced that it is targeting 5.70 billion dirhams in revenue by 2022 under a five-year plan by improving the performance of existing branches, developing new branches and boosting online shopping.  A statement issued by the Coop, quoting chairman Majid Hamad Rahmah Al Shamsi, said investments in assets is expected to increase by 1.93 billion dirhams, while total area would grow to 6.26 million sq ft by 2022.

(Reporting by Anoop Menon; Editing by Michael Fahy)

(anoop.menon@refinitiv.com)

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