Jarir Marketing Co. reported an in-line set of results for the second quarter, with net income increasing 16.8 percent year-on-year (YoY) to SAR147.8 million, said NCB Capital in a review.
The brokerage had estimated a net income of SAR 152.5 million, while the consensus estimate was SAR 144.8 million.
Sales increased 14 percent YoY to SAR 1.58 billion in the period, coming higher than NCB Capital’s estimates of SSR 1.46 billion.
“We believe the better than expected sales were driven by positive like for like from reinstated allowances and strong sales of smartphones. However, this was offset by contracting margins due to an overall shift in product mix towards low-margin electronic products and increased marketing expenses, leading to the in-line results.”
Gross margins expanded 45 basis points YoY to 12.2 percent, but came below estimate of 13.3 percent, due to the change in sales mix towards the low-margin electronics from the high-margin stationery products.
The brokerage is ‘Overweight’ on Jarir, with a price target of SAR 168.30. The reinstated allowances along with new store openings and positive LFL are key drivers for future growth, it added.
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