The Saudi retail sector has been one of the best performing sectors on the Tadawul All-Share Index (TASI) over the past couple of years, significantly outperforming the broader market, Al-Rajhi Capital said in a report.

The sector witnessed a slowdown in sales in the first half of 2014, but is well on its recovery path now, as companies are expanding their store networks and foraying into new markets.

The fundamentals that have driven the Saudi Retail sector remain intact as the kingdom’s young population continues to witness improved employment and rising disposable income, the research firm said.

The sector will be the main beneficiary of the two-month salary bonus announced by the government, as it will boost the demand for consumer discretionary products like apparels and electronic products.

Al-Rajhi Capital remains 'Overweight' on Al Othaim, and 'Neutral' on Jarir, Al Hokair and eXtra.