Harsh economy hits OK stores, struggles to remain on top

OK Zimbabwe says it does not expect an improvement in the operating environment in the March full year as performance will be affected by the fragile economy.

Chief executive Willard Zireva told analysts last week that after revenue in the half year to September dropped 4,8 percent to $232,1 million, the group would have to do its best to maintain its market share in the face of harsh economic fundamentals and competitions.

"We don't see anything at the moment that will spur business growth so activity will be subdued even up to the close of the financial year in March 2015," he said.

He said the company is cognisant of new entries in the retail space such as Meikles Mega Stores and Botswana's Choppies which is expected to open in Harare soon.

"Choppies, currently in Bulawayo, will present competition as customers will certainly be tempted by its nature. In this case, we will continue to maintain market share and expand on branches where opportunity presents," he said.

According to Zireva, customer count in the period was down a marginal 1 percent and net sales down 4,8 percent to $231,1 million from $243,2 million in 2013.

Finance director  Alex Siyavora said the negative revenue growth of 4,8 percent followed the internal inflation trend of -5,6 percent, implying less revenue for the same
volume.

He said gross margins at 18,03 percent versus 16,78 percent last year was a result of efficient procurement and product mix.
The company's product mix is still dominated by imports as local industry remains subdued.

The company also said it had increased the use of the Distribution Centre to supply branches with imported products.

The company recorded a 10,9 percent decline in after tax profit to $4,3 million while earnings per share were down 14 percent to 0,37 cents. Stock turn was down to 9,2 against 9,6 in prior year; which is 39 days against a standard of 30 days.

During the period capital expenditure was $5,5 million compared to H1 F14 $6,3 million as the company forges ahead with expansion and internal bakeries programmes.

To date, the company now has 23 internal bakers, and refurbishments at OK Gweru and Mutare were completed.

Albert Katsande said Kawena continues albeit on a slow pace. He, however, said numbers are on the increase after partners in South Africa upped the game.