· OK Zim volumes down 32% in 3rd quarter and down 28% YTD
· Inflation-adjusted revenue up 50% for the 3rd quarter and 57% YTD
· OK Zim alludes to the need to adapt to the volatile environment
Harare - In a Trading Update for the third quarter ended 31 December 2023, OK Zimbabwe Limited alluded that its overall trading volumes dwindled by a staggering -28% against corresponding period in the prior year while overall revenue rose by 50% in inflation adjusted terms.
The Company attributed the decline in volumes to “stringent supplier payment terms on Zimbabwean Dollar denominated purchases as well as and credit limitations on foreign currency denominated purchases” which were said to have impacted stock availability and hence the sales volumes.
In its half-year report for the period ended 30 September 2023, OK Zimbabwe said the increasing presence of informal retailers has created an uneven competing ground on pricing due to regulatory fees that are charged on formal retailers while the enforcement of these fees is not equally distributed to informal retailers. The Company said this has led to formal retailers recording a recession in customer count due to unfavourable pricing compared to the informal sector. The presence of informal retailers has also led to reduced preference of formal retailers by suppliers as informal retailers offer cash payments in US$ for supplies, while formal retailers offer credit, mainly in local currency as they are mandated and forced to accept every legal tender in the country. OK Zimbabwe, in its Trading Update, has referred to this development as “stringent supplier payment terms”.
In the 9-months to 31 December 2023, overall volumes are 28% down compared to corresponding period last year. In the half-year to 30 September 2023, the volumes were 23% down against comparable period, and this has scaled up.
Meanwhile, due to inflation induced price adjustments, OK Zimbabwe registered a 50% growth in inflation adjusted revenue to ZWL568 billion. Year-to-date, the inflation adjusted revenue rose by 57% to ZWL1.6 trillion. As at the 30th of September 2023, the revenue stood at ZWL728 billion. From a total of ZWL728 billion at half-year to an accumulated ZWL1.6 trillion as at the end of the 3rd quarter, revenue grew by 120% in just 1-quarter from the revenue accumulated in the first 2-quartiles of the fiscal year, ceteris paribus. This is reflective of the inflation effect on financial performance of companies in Zimbabwe, and hence the pricing distortions which lead to less accurate comparison in financial performance terms.
On the other hand, in a statement at the end of its half-year period, OK Zimbabwe welcomed the removal of the 10% margin cap on the instore exchange rate and the removal of IMT tax on card transactions for customers, alluding that this will aid in eradicating price distortions emanating from the uneven exchange rate disparities between the formal and informal exchange rate. Meanwhile, a survey of regular shoppers indicated that OK Zimbabwe has been lately growing favourable in pricing, which is expected to yield positively on customer count going forward. However, a positive performance will only be achieved through proper stock management.
Meanwhile, OK Zimbabwe’s peer company and one of the main rivals, Pick n Pay, recorded a 5% growth in sales volumes in the three months to November 2023, before a further expansion in customer count in December ahead of the festive holidays. The widening poor performance from OK Zimbabwe, therefore, is largely due to incompetent management of resources and lack of long-term operational planning. This planning involves decentralizing of operational strategies to suit different environments in which the outlets operate in, thus allowing for fast adaptability to the volatile environment. In line with this, in the Trading Update for the period ended 31 December 2023, OK Zimbabwe said it is optimistic about its future prospects and recognizes the need to adapt to the changing operating environment.
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