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Jarir expects smartphone sales to boost margins

Tablet and phone sales expected to grow, bonus for Saudis also adds to consumer spending

Jarir expects smartphone sales to boost margins
Jarir expects to see a growth in smartphone sales this year.

Saudi's Jarir Group expects to see strong growth in tablet PC and smartphone sales to drive growth this year.

Muhammad al-Agil founder of Jarir Marketing Company, told Reuters that he also expects handouts announced by the Saudi king at the weekend will also drive retail sales in the Kingdom.

"We expect good growth mainly driven by (sales of) tablets and we also expect strong growth in smart phones. I think the king's statement means that this year will be a robust one in terms of consumer spending and economic activity," he said.

The company expects to see gross margins, which were impacted by weak profitability on smartphones in 2010, to return to 19% by the end of 2011, against 17% last year. For 2010, Jarir posted an annual profit of SR401m ($106.9m) up 7.2%.

"We expect to get back. Last year, we had low market share and to have a good market share we had to dump our prices. Now we see that our margin is going to improve this year. Now we have 10% market share ... This will allow our gross margins to improve, may be 150 basis point. We expect to go back to a gross margin of 19% from 17% in 2010," Agil said.

Agil expects strong consumer demand from the younger population in the Kingdom, and does not expect fears of inflation to slow spending on luxury goods.

"People treat their smartphones as a necessity, they are ready to pay around 1,000 riyals for mobile charges, while they pay no more than 800 riyals for water and electricity and other stuff," he said.

The company plants to open three new stores in Saudi this year, and one in Kuwait, to add to its existing network of 28 outlets.

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