Net income: SAR58.7mn, -81% Y-o-Y, -72% Q-o-Q, -76% vs. EFGe Revenue: SAR1.67bn, -21% Y-o-Y, -24% Q-o-Q, -23% vs. EFGe Operating profit: SAR101.8mn, -73% Y-o-Y, -67% Q-o-Q, -64% vs. EFGe   Fawaz Al Hokair reported very weak 2Q16/17 KPIs, with net income plunging 81% Y-o-Y (-76% vs. EFGe) on lower revenue and severe margin pressure, as well as higher net interest costs (+42% Y-o-Y to SAR41mn). The results confirm that last quarter’s results (EBIT +16%; net income +1%) were solely driven by having more Ramadan days in the quarter (days before Eid are a peak period for clothing shopping in KSA). Revenue fell 21% Y-o-Y and was 23% below estimate as Saudi sales fell 24% partly on Ramadan timing differences, as well as weak post-Hajj sales due to extended school holidays. 1H16/17 revenue was down 3% Y-o-Y (1Q16/17 was +17%), which we believe is a more representative number of top-line trends (barring seasonality factors). Gross margin plunged c10.4pp Y-o-Y to 19.1% (vs. EFGe of 27.7%) on increased promotions, inventory provisions of cSAR40mn and slow ramp-up of newly-opened stores. Accordingly, gross profit fell 49% Y-o-Y and was 47% below estimate. EBIT margin fell a stronger c11.7pp Y-o-Y to 6.1% (vs. EFGe of 12.9%) as SG&A costs (including depreciation) fell at a lesser pace than revenue (-12% Y-o-Y; -33% vs. EFGe). EBIT, thus, dropped 73% Y-o-Y (-64% vs. estimate).   A very weak results set that highlight challenges in KSA discretionary spending and confirm our view that last quarter’s strong numbers are unsustainable. The only bright spot is some SG&A cost controls. We have a Neutral rating on the stock. (Hatem Alaa, Nada Amin)   Al Hokair: SAR21.95 as of 19 October 2016, Rating: Neutral, FV: SAR42.00 per share, MCap: USD1,229mn, ALHOKAIR AB / 4240.SE