Nilesh Ved’s war strategy sends Apparel Group seeking stock

On the first day of the Iran war, Nilesh Ved called senior government figures with a question that mattered to retailers across Dubai: Would the malls stay open?

Within two minutes, they rang back with a reply. “Business as usual,” he was told.

For Ved, founder and chairman of the multi-billion-dollar AppCorp Holding – whose Apparel Group operates about 500 stores in the UAE – the swift response reflected a pattern he has seen repeatedly.

The UAE, he said, built its reputation by keeping commerce moving through crises.

Sold out

The Iran war has rattled the Gulf’s consumer economy ahead of what was already shaping up to be a difficult summer for retailers. Missile and drone attacks have disrupted aviation routes, pushed up freight costs and triggered anxiety among the expatriates and tourists who drive spending at Dubai’s malls, restaurants and property market.

Yet for many of the UAE’s older business families, crises also represent moments of opportunity – to preserve market share, negotiate deals and prepare for recovery before confidence returns.

The old Dubai instinct kicked in for Ved, who built Apparel Group with his wife Sima Ved from a single Dubai store in the 1990s into a retail operation employing 27,000 staff and operating more than 2,500 stores across 14 countries.

Apparel Group, which represents more than 85 international and homegrown brands, moved early on promotions to keep cash flowing and clear stock.

“We’re the first one to go on discounts,” he told AGBI.

“We lost a bit of margin. We cover it up on the top line. And that is important. You have to do that. You’ve got to be creative. Don’t sit still.”

Sacrificing margin to drive sales volume helped keep cash flowing, Ved said. But it also created a different problem.

“Today we are less on inventory,” he said. “Supply chain logistics is our biggest challenge. We’re not being able to get our products in.”

Freight costs, he added, have become “prohibitive”.

One of the Gulf’s largest fashion and lifestyle retail groups, Apparel Group’s brands include Tommy Hilfiger, Calvin Klein, New Balance, Skechers and Tim Hortons. The broader AppCorp Holding business spans retail, ecommerce, logistics, food and beverage and real estate.

Striking a bargain

Ved spoke on the sidelines of a UAE India Business Council meeting, after being named chair this month.

The council was set up after the 2022 UAE-India Comprehensive Economic Partnership Agreement (Cepa). Its founding members represent some of the largest Emirati and Indian business groups, with combined assets exceeding $1 trillion.

He told members that his optimism about the current crisis comes partly from a lifetime of watching Dubai rebound from shocks and partly from his belief that the UAE’s deepening relationship with India has yet to fully translate into business opportunity.

Many Indian suppliers, he said, still do not fully understand the trade pact’s advantages.

“When I tell some of my partners or vendors that we have no duties if you are exporting this from India, they get a little surprised and shocked,” he said.

Ved wants more companies to use Dubai as a platform to expand across the Gulf, Africa and beyond.

He also floated a more ambitious idea: allowing Indian immigration pre-clearance at UAE airports, similar to the US entry-clearance arrangement in Abu Dhabi.

“That could really be a big support,” he said.

Ved said decades in Dubai – through regional wars, the global financial crisis and Covid-19 – had taught him that crises in the emirate tend to pass faster than people expect.

“I’ve lived here all my life,” he said. “[Based on] my learning, I tell my team, ‘Be quick, the crisis will get over, you will not get a deal after that’.”

‘Cash is king’

Ved is still looking for bargain acquisitions, including in Saudi Arabia, but said sellers are holding on because “they have made so much money in the last five years”.

Still, the region faces a sharp economic shock. A slowdown in tourism has weighed on footfall and discretionary spending across the country’s retail sector, where rents remain high.

The war is costing the Middle East about $600 million a day in lost visitor spending, according to the World Travel & Tourism Council. Oxford Economics estimates that total losses this year could reach $56 billion.

Ved’s advice to executives to ride out the slower summer is to stay lean. “Run your business by cash flow, not by a P&L,” he said. “Cash is king.”

That discipline, he said, also means acting before conditions worsen. “Am I cutting costs? Yes. We have seen it during Covid too… everyone found ways to cut,” Ved said.

“Everybody can lose one or two kilos. You’ve got to be fit for a marathon.”

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At the mall, in a war

The conflict has also exposed the gap between how Dubai feels from inside the city and how it is viewed from abroad.

Ved said friends and relatives in India call to ask whether he is safe.

“When I tell them I’m in a mall having coffee, they can’t believe it,” he said. “Because what they hear, what’s reality is very different.”

The disconnect persists as the conflict remains unresolved. Negotiations are continuing, but the ceasefire has been repeatedly strained by flare-ups.

Ved still expects the panic to fade. “We’ll be standing here in six months and say, ‘remember those days?’” he said.

“Just like we talk about Covid.”