Lulu shrugs off rivals’ stock performance ahead of IPO

• Lulu confident ahead of IPO
• ‘Scale is the difference’
• Targeting Saudi growth

Lulu Retail Holdings, one of the Middle East’s largest hypermarket operators, has shrugged off the double-digit stock declines of its listed competitors as it kicked off its initial public offering, focusing on its expansion plans.

The company is selling a 25 percent stake, and more than 2.5 billion shares are to be offered at a nominal value of $0.014 on the Abu Dhabi Securities Exchange (ADX).

Lulu’s IPO comes on the heels of UAE-based grocery chain Spinneys’ listing on the Dubai Financial Market in May. This attracted more than $19 billion in orders for its $375 million offering – 64 times oversubscribed. Despite the initial excitement, Spinneys’ shares have since dropped nearly 12 percent to AED1.50. 

Union Coop, formerly known as Union Cooperative Society, was founded in Dubai four decades ago and listed on the DFM in July 2022. It has declined 41 percent since.

Lulu Retail CEO Saifee Rupawala dismissed concerns over sector sentiment.

“Scale is the difference between us,” he told AGBI at a press conference on Tuesday.

“Unlike our peers, we are a pan-GCC, full-line retailer. We serve over 600,000 customers daily, offer more than 200,000 SKUs [stock-keeping units], and serve 120 nationalities. We are performing very well [and] our growth is immense.”

Lulu held a 13.5 percent share of the GCC modern offline grocery market in 2023, and has operations across the UAE, Saudi Arabia, Oman, Qatar, Kuwait and Bahrain.

Lulu

It holds the top spot in Oman, Qatar, Bahrain and Kuwait, and is the second-largest retailer in the UAE. In Saudi Arabia, it leads the market with the highest sales per square metre and average store sales.

Ashraf Ali, executive director of Lulu Group International, stressed the vast potential in Saudi Arabia.

Lulu currently operates in 14 Saudi cities but plans to expand to 33, he said, capitalising on population growth and increasing consumer demand.

The group believes the Saudi grocery retail market will reach $48 billion by 2028, citing figures from Euromonitor. 

The GCC grocery retail market is projected to grow at a 4.2 percent compound annual growth rate between 2023 and 2028, while the modern retail market is expected to grow at 4.8 percent during the same period. 

Lulu is also focusing on expanding its private label business, which accounts for 29 percent of its revenue.

For the fiscal year ending December 2023, Lulu’s revenue grew 5.6 percent to $7.28 billion, while EBITDA rose 7.2 percent to $753.4 million. 

The company also reported 5.6 percent year-on-year revenue growth in the first half of 2024, reaching $3.87 billion.

Lulu will not receive any proceeds from the IPO. The net proceeds will go to the selling shareholder, Lulu Holdings, which is 80 percent owned by the group’s chairman and managing director, Yusuff Ali, and 20 percent by Abu Dhabi sovereign wealth fund ADQ.

• Supermarket major Lulu officially announces IPO

In 2020 ADQ acquired a 20 percent stake in Lulu, worth just over $1 billion, to support the group’s expansion, particularly in Egypt.

“I have a very strong cash flow, and that cash flow is enough for me to take care of my future growth,” Rupawala said, adding that the company is not currently considering a dual listing but may explore the option in the future.

Founded in 1974, Lulu employs more than 65,000 people. It operates 240 stores, including 116 hypermarkets, across the GCC.

Lulu’s IPO is part of a broader wave of high-profile listings on ADX, which have added more than AED21 billion in value to the UAE’s stock market in 2024.

Yusuff Ali said on Tuesday that the near-term outlook for the market is positive, driven by socio-economic factors including growing populations, strong economic and infrastructure development, and security.