Reports suggest the HyperPanda hypermarket in Dubai Festival City will soon be closing. It is one of the largest hypermarkets(16,250 sq. m) in Dubai and has operated for 10 years. It is Panda’s only hypermarket in Dubai and, therefore, its closure will see Panda exit the market.
It is said that the company may offer clearance sales soon, although they have not been officially announced yet. However, the store has seen a rush of customers buying goods, such as toiletries.
The closure comes despite Panda announcing in 2014 that it planned to invest AED3 bn (US$816.7m) into expanding the HyperPanda format across the UAE. However, it appears that the recent performance of Panda's parent company, the Savola Group, and a change in the long term expansion plans for the company has led to a change in strategic focus.
Savola Group affected by slowing growth
The Savola Group has experienced slowing sales growth in recent quarters, and performance has fallen below the company's stated forecasts. It experienced losses of SAR900m (USD239m) in Q4 2016, its first loss in eight years.
The economic slowdown in Saudi Arabia, Savola's home market, has hit customer demand. Grocery retailing has experienced a rapid deceleration in growth. One of the outcomes of the retailer's slowing performance in Saudi Arabia has been the closure of 51 smaller Pandati stores in the country, suggesting that the retailer is looking to evolve its store portfolio to better represent its longer term growth opportunities.
The closure of the Dubai store is likely to be a part of this refocusing, with Savola looking to grow its store base in Egypt now. As a result, its one store in Dubai looked increasingly like an outlier in its expansion plans, especially given the sustained expansion from competitors in Dubai.
Future plans underlines growing focus
As part of the Savola Group's Q4 2016 results, it said it will be looking to adapt its operating model to reflect the changing retail market in Saudi Arabia. This will see it focus on two main areas;
1: Transformation programme To turnaround its performance, Panda said that it had instigated a i>’transformation programme’. This will see it manage its capital resources more effectively.
An element of its focus on managing its capital resources more effectively will lead to it to continue to close underperforming convenience stores.