OK Zimbabwe Reports 36% Decline In Sales Volumes For Q3 2024
OK Zimbabwe Limited experienced a challenging trading environment in the third quarter of 2024, driven by reduced consumer spending, local currency devaluation, and liquidity shortages.
In its trading update for the quarter ending 31 December 2024, released on 14 February 2025, OK Zimbabwe reported stockouts caused by limited supplies and increased operating costs due to frequent power outages, which led to temporary branch closures. Group Company Secretary Margaret Munyuru said:
The operating environment was largely subdued due to lower-than-expected consumer spend in the quarter under review.
Acute local currency liquidity shortages re-access to the much-needed funding to cover working capital cycles across the formal retail sector.
The local currency unit, ZWG, experienced a sharp devaluation in September 2024 as monetary authorities sought to improve the viability of the exchange rate system for the broader economy.
Invariably, the devaluation had the net nearly doubling existing US dollar-denominated obligations in loans and creditors’ balances.
During the quarter under review, OK Zimbabwe experienced frequent stockouts, with daily availability levels averaging only 50% of normal stocking levels. Reads the update:
The Group experienced episodes of stockouts during the quarter under review as evidenced by daily availability levels of around 50% of normal stocking levels stockouts arose from restricted supplies from manufacturers and distributors.
The Group had outstanding and overdue creditors’ balances which were predon denominated in US Dollars against a backdrop of low US Dollar sales collection, at times reaching as low as 20% of sales revenue.
The low stocking levels are a manifestation of sub-economic pricing arising out of exchange rate distortions and suppliers’ need for foreign currency invoicing to cover their operational and raw needs.
Suppliers continued to insist on shorter trading terms and in some cases prepayments for supplies invoiced in local currency.
This exerted pressure on the working capital and necessitated the need to access short-term funding.
Load shedding negatively impacted the company by disrupting operations and driving up costs, as the business had to rely more on alternative power sources. Said Munyuru:
Power outages worsened during the trading period resulting in disruptions in business operations and increases in operating costs as the business relied more on alt sources of power.
To mitigate against rising operating costs, the Group resolved to close four branches in Glen Norah, Kuwadzana 5, Chitungwiza Town Centre and Manyika Street, all in Harare.
Review and consideration of the future of branches saddled with the stifling impact of unsustainable operating cost structures and licencing requirements is in progress.
OK Zimbabwe registered a 36% decline in sales volumes compared to last year, but year-to-date growth of 10%. Reads the update:
Volumes decreased by 36% in comparison to the same period last year. However, on a year-to-date basis, the Group recorded volume growth of 10% over the same period.
The reduction in volumes recorded during the quarter translated to a decline in revenue of 36% as compared to the prior period.
The company is restocking with supplier support and financial aid while exploring alternative procurement models.
The company’s future depends on economic stability and policy changes to improve market conditions. Said Manyuru:
The business has begun restocking the operating units with support from supplier partners as well as financial institutions that continue to assist with short-term structures.
New alternative procurement models have been developed which include, but are not limited to, a structured stock supply arrangement with third p supplier assurance purposes as the business works to restore critical supply relationships with both local and foreign suppliers.
The Group is confident of restoring stocking levels before the closure of the current financial year.
The fortunes of the country’s formal retail sector are hinged on the stability of our exchange rate regime.
Consultations with both Fiscal and Monetary Authorities have relaxed the very strict policing of applicable in-store exchange rates.
The Group welcomes the recently announced Monetary Policy Statement measures which number of limitations and introduced some level of flexibility within the foreign exchange market.
However, there is a need for absolute clarity on the roadmap toward a market-determined exchange rate system.
Such a liberalized system will go a long way in restoring the competitiveness of the formal retail sector.
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