- The company opened new stores
- Victoria Falls hotel was refurbished
- The company changed its financial year-end from March to February to align with the year-end of the main subsidiary, TM Supermarkets (Private) Limited
Harare- Diversified retail outfit, Meikles Limited Zimbabwe has expanded its property portfolio in the full year to 28 February 2023 after the completion of various projects. Meikles Limited, which is into retailing, hospitality, and property markets capped the full year with a profit for the period of ZWL3 billion during the 11 months to 28 February from ZWL8 billion during the full year ended 31 March 2022.
The Company changed its financial year-end from March to February to align with the year-end of the main subsidiary, TM Supermarkets (Private) Limited. Therefore, the financial results presented are for eleven months to 28 February 2023 alongside twelve months to 31 March 2022.
The company funded its store expansion and refurbishment projects from operating cash flows, a move that shows its commitment to growing its business in a sustainable way.
During the period under review, Meikles completed the construction of three new stores in Highland Park, Madero, and Simon Mazorodze, with two more stores nearing completion. The company also successfully repurposed its main property in Mutare and completed a fully occupied mall along South Avenue in Harare.
In a statement accompanying the FY financials, the company’s chairperson John Moxon said the projects were a success, despite depressed margins and operating in a turmoil economic environment.
“Despite the reduction in profit margins, the segment funded its store expansion and refurbishments from operating cash flows,” said Moxon in a statement accompanying the full year financials.
“The planned development and repurposing of the main property in Mutare was completed during the period under review and all the available space was taken up by tenants,” he said.
In addition, Meikles completed the refurbishment of its building along Robert Mugabe Road in Harare, which is now anchored by TM Pick n Pay. The company-initiated refurbishment works on the main building in Bulawayo, which is expected to commence in due course.
From the hospitality segment, Meikles completed the refurbishment of 47 rooms of The Victoria Falls Hotel, a move that is expected to boost the hotel's competitive positioning in the market. This is crucial as more tourists are expected to trickle in the country rebounding from the COVID-19 era.
Despite the reduction in profit margins, Meikles' strategic expansion of its property portfolio is a positive move for the company's long-term growth. The company is taking advantage of opportunities to invest in high-quality real estate assets that can generate income and potentially appreciate in value over time.
Expanding its property portfolio is a strategic move for Meikles in terms of earnings, expenditure, and growth. While the reduction in profit margins during the expansionary period may have impacted the company's short-term earnings, the long-term potential for growth and income generation from the new and refurbished properties could outweigh these costs.
In terms of expenditure, Meikles has funded its expansion and refurbishment projects from operating cash flows, indicating that the company is investing in a sustainable way that is not dependent on debt financing or equity issuances. This could help to keep the company's overall debt levels manageable, which is important for maintaining financial health in the long run.
In terms of growth, Meikles' expansion of its property portfolio provides the company with opportunities to generate income and potentially appreciate the value of its assets over time. The addition of new stores, malls, and refurbished hotel rooms can attract new tenants and customers, increasing the company's revenue streams and market share.
However, the property market in Zimbabwe can be challenging, with economic and political instability, currency depreciation, and regulatory and tax hurdles posing risks and uncertainties for investors. Meikles will need to carefully navigate these challenges to ensure the success of its expansion plans.
To navigate these headwinds and continue the positive trajectory, Meikles can adopt a flexible leasing strategy: Meikles could consider adopting a flexible leasing strategy to attract and retain tenants in a challenging property market. This could include offering shorter lease terms, rent holidays, or other incentives to tenants. However, these all depends on the opportunity costs. In the United States, retailers such as Macy's and Target have increasingly adopted shorter-term leases to allow them to respond more quickly to changing market conditions. By offering more flexible lease terms, these retailers can more easily adjust their store footprints and locations based on changing consumer preferences and market dynamics.
Meikles could leverage technology to improve the customer experience and reduce operating costs. This includes investing more on its Click and Collect online platform, continue investing in data analytics to better understand customer preferences, or adopting energy-efficient technologies to reduce operating costs. In the United Kingdom, for example, retailers have increasingly embraced online ordering and delivery systems to reach customers and reduce costs.
We are cognisant that the company is already diversified. However, given the balance sheet is firm, it might consider to further diversify revenue streams. This could include offering complementary services, such as property management or maintenance services, or investing in other sectors that are less reliant on the property market, retailing and hotels like healthy or financial services. Walmart and Kroger have expanded into healthcare by offering in-store clinics and health services. By diversifying their revenue streams beyond retail, these companies have been able to reduce their reliance on the volatile retail market.
Also, the company can further invest in partnering with local stakeholders, including governments, community organizations, and other businesses, to navigate the challenges of the Zimbabwean property and retail market. This could include collaborating on infrastructure projects, sharing resources, or advocating for regulatory changes that benefit the industry. In Australia, for example, retailers have worked with local governments to revitalize struggling retail districts.
Through these, the company can even overcome the impact of smuggling. Zimbabwe has porous borders, and with corruption continuing to hit the bar, smuggling of goods continues to be rampant. illegal imports flood the market with cheaper, often lower quality, products that undercut the prices of legally imported or locally produced goods. This can make it difficult for Meikles to compete on price and may lead to a loss of market share and reduced efficacy.
If illegal imports gain a significant share of the market, Meikles' revenue could be impacted. This is common mostly after elections when everything goes out of hand due to porous economic and political policies by the government which scares investors. To dose the problems, government normally open up borders for cheap imports.
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