Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
LuLu Retail Chief Executive Officer Saifee Rupawala expects a continued recovery in the company's performance in the fourth quarter and into next year, saying the pressures affecting the retail giant's revenue and profitability are temporary and do not reflect any fundamental weakness in its business model.
LuLu Retail Holdings, listed on the Abu Dhabi Securities Exchange (ADX), reported a 27.6% decline in net profit to $118 million for the first nine months of 2026, compared with $162.9 million in the corresponding period last year.
The company attributed the weaker performance to regional geopolitical developments and subdued demand for discretionary non-food products.
Speaking to Aletihad, Rupawala said: “The performance in the first nine months of the year has been impacted by circumstances outside our control.”
He said the company's growth in previous years validated its business model, while the improvement in trading conditions during 2026 suggested that the disruption was short-term rather than indicative of a structural shift.
“The recovery has already begun and will continue in Q4 and into next year,” Rupawala said.
The company's revenue declined 1.1% to $5.927 billion during the nine-month period ended September 30, compared with $5.994 billion a year earlier, according to its financial statements.
Gross profit fell 2.6% to $1.346 billion from $1.382 billion, while profit before tax declined 26.1% to $136.2 million from $184.3 million.
In its directors' report, the company said lower revenue affected overall profitability, although ongoing cost management initiatives partially mitigated the impact.
Explaining the decline in earnings, Rupawala said the food business, which accounts for approximately two-thirds of LuLu's operations, continued to perform well.
“Food sales were up year-on-year in every geography in Q3. The reason for lower profit is the weakness in non-food sales, which have been impacted by consumer sentiment,” he said.
“However, non-food sales improved in Q3 vs Q2, so we are confident that conditions will continue to normalise.”
The company reported a return to revenue growth in the third quarter, with sales increasing 2% to $1.935 billion from $1.896 billion in the corresponding quarter last year.
Gross profit for the three-month period declined 1.2% to $443.5 million from $448.9 million, while net profit fell 19.1% to $29.1 million from $36 million. Profit before tax decreased 14.9% to $34 million from $39.9 million.
The company reported EBITDA of $175 million for the quarter. Gross margins were affected by higher input costs and limited ability to pass these increases on to customers through pricing.
Rupawala said the pressures on margins and profitability were also expected to ease as external conditions improved.
“The recovery seen through this year suggests that these are temporary pressures. Similarly, the margin and profit impact from higher costs will reverse out when the broader situation stabilises,” he said.
Disciplined cost management helped contain the increase in operating expenses to 1.2% during the third quarter, with costs across the established store network declining modestly. The overall increase in operating expenses was primarily attributable to new store openings.
“From a strategy perspective, tight focus on operating expenses has ensured the company remains profitable. This has included a reduction in costs at our existing stores,” Rupawala said.
Despite the slowdown, LuLu Retail reported growth in essential consumer categories during the first nine months. Fresh Food sales increased 2.6%, while Consumer Packaged Goods sales rose 2.1%.
E-commerce emerged as a major growth area, with sales increasing 55.2% during the nine-month period and accounting for 8.8% of retail revenue, an increase of 328 basis points from the corresponding period last year.
During the third quarter, e-commerce sales rose 53% to $177 million, representing 9.7% of retail sales. Sales through LuLu's own digital platform more than doubled year-on-year.
Asked about competition from online retailers such as Amazon and Noon, and the relatively small contribution of e-commerce to LuLu's overall revenue, Rupawala said the company was focused on profitable online growth through both its own platform and partnerships with aggregators across its markets.
“Our proposition is a broad range of products are available in 90 minutes,” he said.
The strategy includes continuous improvements in platform technology, expanding the number of stores supporting e-commerce operations and making a wider range of non-food products available online.
“Sales via our own platform doubling in a year validates our strategy,” Rupawala said.
He also defended the company's continued investment in physical stores at a time when online shopping is gaining ground.
“Stores are only opened where they are expected to meet our returns expectations. New store openings are focused on new communities in the UAE and areas without a presence in the KSA. Our stores also function as fulfilment centres for our online channel,” he said.
LuLu opened five stores during the third quarter, taking the total number of openings during the first nine months to 22. Its network comprised 288 stores across the GCC at the end of September.
The company said more than three-quarters of its planned store openings between 2027 and 2031 would be smaller-format Express stores or Mini Markets, reflecting its focus on selective expansion and operational efficiency.
