ZIMBABWE – Zimbabwe Stock Exchange (ZSE)-listed retailer, OK Zimbabwe Limited (OK), says it is engaging foreign retailers for the manufacturing of in-shop brands to boost the group’s revenues.
Its chief operations officer, Albert Katsande, told analysts last week that the group was failing to realise profit from in-house brands due to the state of local industry, which is operating below optimum capacity.
“Own brands contribution is yet to grow. Volume is limited by local industry limitations but some foreign suppliers are beginning to respond positively,” Katsande said at the presentation of the retailer’s results for the year to March 31, 2015.
Zimbabwe’s manufacturing sector — currently operating at 36 percent capacity – is projected to slump to 30 percent by the end of the year due to declining economic conditions in the country.
Although Katsande did not disclose names of the foreign firm, he said the in-house brands would start contributing “reasonably” in the next financial period.
However, indications are that the manufacturers are likely to be South African companies.
Market experts say the South Africa-based franchise is expected to go the Pick n’ Pay route, of importing brands into Zimbabwe for competitive pricing.
Over the past few years, OK has been developing its own brands such as the OK Pot ‘O’ Gold, OK Value, Shoppers’ Choice and Bon Marche’ Premier Choice labels.
Meanwhile, OK recorded a 4,3 percent slump in revenues to $462,7 million in the 12 months to March from $483,7 million posted prior year due to low disposable income.
“Revenue generated for the year decreased by 4,3 percent to $462,7 million the $483,7 million posted in prior year.
“Profit before tax was 20 percent down at $10,6 million from $13,4 million in the previous year while profit after tax decreased by 22,2 percent to $7,5 million from $9,7 million,” said OK chief executive, Willard Zireva, adding that competition within the retail sector, and poor agricultural seasons over the past two years had also affected the group.
Earnings before interest, taxes, depreciation, and amortisation (EBITDA) dropped 10,3 percent to $17,7 million while earnings per share dropped 23,5 percent to 0,65 cents.
The group’s capital expenditure for the year was $11,3 million down from $12,4 million in the prior year, on the back of store refurbishments, new stores and replacement of old plant and equipment.
Zireva also said direct imports into the country had slumped due to government’s regulation of the sector with import permits and licences which were reintroduced to the middleman.
“Local supply is still hamstrung by outdated technology, lack and cost of capital, as well as the state and cost of utilities, inter alia, however both foreign and local suppliers reduced prices to stimulate demand,” said Zireva.
While the group’s overheads were up to 3,8 percent, sales growth was negative as the rate of increase slowed down significantly with higher depreciation expense from continuing capital expenditure.
The group said it will open more supermarkets, OK conventional shops as well as low cost shops to deal with competition.
“A new OK will be opened in Mutare soon while another one is currently under construction and will be opened in Zvishavane by September, and another OK Mart is planned for Victoria Falls later in the year,” he said.