Extra's results for the second quarter of 2026 missed market expectations, as net profits fell again, with retail activity showing resilience amid slowing spending, while consumer financing operations were the main factor behind the decline in profits.

The company, which leads the electronics retail sector in the Gulf region, posted a net profit of 102.6 million riyals, down 3.7% year-on-year, compared to the average analyst estimate of 116 million riyals.

Revenue rose to a record 2.24 billion riyals, up 5.5%, but fell short of estimates that pointed to 2.26 billion riyals.

Despite continued revenue growth, the results showed a notable slowdown in the pace of growth, as the sales growth rate dropped to 5.5% from about 11% in the same quarter last year, indicating a decline in demand momentum compared to the previous year.

The company's annual report based its 2026 forecasts on continued improvement in consumer spending, expansion in e-commerce, and growth in financing operations.

However, the second quarter witnessed different variables, most notably geopolitical disruptions that affected supply chains and raised shipping costs, alongside continued competition in the electronics market.

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Retail continues to grow... but financing paints a different picture

The results reveal that retail activity, the company's core business, continued to perform well, as the company reported a 7.3% year-on-year growth in the segment's net profit, supported by a rise in the average basket value and continued growth in corporate sales (B2B).

In contrast, the decline in profits came from the consumer financing arm 'Tasheel', in which Extra owns a 65% stake, as its net profit fell 20.3% to 48.2 million riyals.

Although Tasheel's financing portfolio continued to grow year-on-year, the slowdown in its growth compared to the previous quarter, along with higher financing and operating costs, contributed to pressure on profitability, which was directly reflected in Extra's consolidated results.

This is particularly significant, as the company's annual report for last year focused on continuing to expand Tasheel's operations as one of the group's key growth drivers, but the second-quarter results showed a decline in the profitability of the financing arm, which weighed on profits.

Margins under pressure

Extra's profitability declined across various levels, as operating profit fell to 142 million riyals, while the operating margin dropped by about 80 percentage points to 6.3%, and the net profit margin fell by 40 basis points compared to the same period.

Although gross profit rose to 473 million riyals, its growth rate was lower than revenue growth, reflecting the onset of pressure on profit margins amid rising costs.

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Shipping pressures may affect second-half profits

These results come at a time when regional disruptions have affected shipping movements, significantly raising transportation costs, suggesting that the second-quarter results may represent the beginning of pressures shifting to the sector, while the greater impact may appear in the second half of the year as higher import costs start to reflect on selling prices.

Meanwhile, the stock's performance reflected investor reaction to the earnings, as Extra's shares dropped about 6% after the results announcement, recording the biggest daily loss since December 2024, and closing at its lowest level since January 2023.

Thus, the stock's losses since the start of the year have risen to about 18%, a performance that goes against the trend of the retail and luxury goods distribution sector in the Saudi market, which rose about 2.9% over the same period, supported by strong gains in Jarir's stock.