Kuwait: Growth in store for retail

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The completion of a sizeable local tower project, continuing expansion of the country’s largest mall and moves by a major Kuwaiti retail firm into the UK market have underlined the rising growth and confidence in the domestic retail sector.

This confidence is being seen in new investment and projects, with Kuwait’s largest mall and shopping centre, The Avenues, building a $500m extension scheduled for completion by September 2012. The mall’s “third phase” expansion will cover 100,000 sq metres, bumping The Avenues’ total area to 420,000 sq metres.

Mohammed Abdul Aziz Alshaya, chairman and managing director of Mabanee Company, which owns the shopping complex, told Kuwaiti media last year that the success of The Avenues was shown by the “great demand for leasing in the new extension by regional and international high-end brands”, including UK high-street brand Harvey Nichols.

Other recent major developments include the Al Harma Luxury Centre, part of the 412-metre-tall Al Harma tower that was completed in January at an estimated cost of $950m. Forming part of the tallest sculpted tower in the world, the retail wing will feature 195,000 sq metres of commercial and office space.

It is not just local firms that are noticing the uptick in domestic retail growth. In January, monitoring firm Research and Markets wrote that Kuwait’s “high level of urbanisation” was contributing to a “vibrant” retail sector, with sales expected to grow from an estimated KD2.27bn ($8.45bn) in 2011 to KD3.24bn ($12.06bn) by 2015.

A November 2011 report on the GCC’s retail market by investment bank Alpen Capital also noted that the wholesale and retail trade sector expanded by a robust 27.6% year-on-year (y-o-y) in 2010.

In fact, Kuwait was ranked first in the Middle East for retail expansion and development by the Global Retail Development Index released in June 2011 by AT Kearney, a global management consulting firm. Evaluating 25 macroeconomic and retail-specific variables in the world’s top-30 retail nations, the survey placed Kuwait fifth worldwide and first in the region.

And in its 2011 “How Global is the Business of Retail?” report, CB Richard Ellis, a global property firm, ranked Kuwait the world’s 13th-most international retail market, alongside Singapore and outranking countries such as Belgium, Japan, Canada and Switzerland. It was also awarded 13th most-popular retail city, beating out destinations including Milan, Munich, Las Vegas and Miami.

A major factor in Kuwait’s retail success is its young and increasingly wealthy population, with a median age of 29.8 years for males and 26.3 years for women, as well as a 1.99% annual population growth rate. Meanwhile, GDP per capita is predicted to grow to some $64,027 by 2015, up from $40,700 in 2011, according to the IMF.

The strength of the country’s demographic potential is reflected in rising consumer confidence, with the National Bank of Kuwait (NBK) announcing in February 2012 that the nation’s economic growth of 3.8% this year would be “driven by positive performance in Kuwait’s consumer sector”.

The NBK said Kuwait’s consumer price index (CPI) inflation is expected to be 4% in 2012, 0.8% less than 2011, while the bank has predicted a KD9bn ($32.33bn) budget surplus this year.

Backed by this solid growth at home, in January, the Alshaya Group, a Kuwaiti retail conglomerate, announced it was buying a significant chunk of struggling lingerie firm La Senza from administrators KPMG. The deal includes exclusive franchise rights for the La Senza brand in the UK, as well as 60 stores.

“We are delighted to have reached an agreement to buy these La Senza stores − saving jobs, protecting a great brand for consumers and strengthening our UK presence and links, “said Mohammed Alshaya, the executive chairman of the Alshaya Group. “This is a strategic investment for us and a positive addition to our extensive international retail portfolio.”

The purchase is part of Alshaya’s plans to invest $155m in the UK retail market in the next two years.

The interest works both ways, however. UK brand Marks & Spencer (M&S) has said it could double its number of stores in Kuwait from two to four if business continues to do well. “Kuwait was incredibly strong for us last year,” Bruce Bowman, the head of Gulf operations for the company, told local media.

With such a strong domestic market, growing disposable incomes, plus a favourable long-term economic outlook, Kuwait’s retail sector is poised for continued expansion both at home and via increasing participation in other markets.

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