The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Business and consumer confidence are still too low to “drive the level of economic growth the Bahamas needs”, AML Foods chief executive said yesterday, with election uncertainty set to “dilute” Baha Mar’s impact.

Gavin Watchorn told Tribune Business that while the mega resort’s anticipated April opening, and gradual ramp-up, would provide a much-needed boost, other factors were likely to offset this during the 2017 first half.

The BISX-listed food retail and franchise group’s chief executive said that apart from the uncertainty associated with US president-elect, Donald Trump’s, plans and actions, the next five months were also likely to be overshadowed by the Bahamas’ own general election campaigns.

“There is still a lot of uncertainty out there that is diluting the optimism that may be generated from Baha Mar’s opening,” Mr Watchorn told Tribune Business yesterday.

“Quite frankly, there’s not the level of confidence in the economy that is required to drive the level of growth that the economy needs.”

Bahamian-owned businesses, in particular, tend to pull back on expansions and job-creating investments during the run-up to general elections, and instead wait to see the outcome and policy intentions/directions of the new government.

Consumers, too, tend to adopt the same approach until they obtain a better indication of a new administration’s policy approach and initiatives.

But, while acknowledging that private sector and consumer confidence currently remain inadequate to generate faster GDP expansion, Mr Watchorn said Baha Mar’s long-awaited opening would generate some momentum.

The $3.5 billion property’s new owner, Chow Tai Fook Enterprises (CTFE), has said it plans to hire 1,500 Bahamians by the time of its April ‘soft’ opening, and more than 3,000 by August 2017.

Mr Watchorn said the additional salaries earned by Baha Mar’s new hires would circulate rapidly in the Bahamian economy once they started spending, with the impact trickling down to multiple businesses.

“Baha Mar’s opening should have a positive impact on the economy in general,” he told Tribune Business. “The Bahamas economy in general is relatively closed, and with any additional salaries, the circulation of spending tends to be significant.

“The dollar that is spent in the gas station is spent in the hair salon and is spent in the small food store, so the same dollar gets spent many times over, and increases the velocity at which dollars circulate in our economy.”

Mr Watchorn, though, said the BISX-listed company, which operates the Solomon’s SuperCentre, Solomon’s Fresh Market and Cost Right brands, was relying on itself - rather than the wider Bahamian economy - to generate growth and profits.

“AML remains upbeat primarily because of what we’re doing,” he told Tribune Business, “not necessarily because of what’s happening in the wider economy.

“We have our strategies, and we’re working on what we can control first, executing as best we can. We want to look for opportunities internally. Opportunities exist to serve customers better, and that will help us to grow our sales.

“AML is very internally focused; we know there’s areas we need to improve on for the customer experience, and we’re going to continue to work on those.”

Mr Watchorn added that AML Foods had “exceeded last year’s” sales for the Christmas period, as its top-line growth continues to be driven by increased customer volumes rather than per capita spend.

“We had a good Christmas. We met our targets and exceeded last year,” he said. “It was late this year because of how Christmas fell, but the sales and volumes came.

“With Christmas falling on a Saturday, people waited until the end of the week to do their shopping. The volumes came later than most retailers like, but they came.”

Describing consumer spending as “generally flat”, Mr Watchorn added: “We are driving increased sales through increased transactions and volumes, and ultimately by getting people to spend more.

“Getting more people into your store builds long-term sales growth. Our primary goal is to grow transaction growth rather than ticket. When you build a loyal customer base, your average spend will ultimately come.”

AML Foods net profits fell by 21.6 per cent for the quarter to end-October 2016, dropping from $551,000 the year before to $432,000 as it overcame “the bump in the road” caused by Hurricane Matthew.

The group incurred net losses after insurance of $533,000, but Mr Watchorn said it had recovered swiftly from Matthew’s impact, with half-year profits of $1.915 million up 19.5 per cent year-over-year.

“While our hurricane coverage is pretty strong, when you have deductibles for every location and asset, and when you throw in things like generator fuel.....,” Mr Watchorn said of the extra $533,000 cost.

“We’re having a good year,” he added. “We’re meeting sales targets, and are encouraged with how we’re meeting profit expectations.

“We don’t expect anything significant to impact us between now and the end of the year [in April]. Once we get past October, we’re into a strong period, November through April.”