ZIMBABWE risks facing acute basic commodities shortages in the coming few months due to cash shortages and low disposable incomes, an equities firm has said.
Old Mutual Securities (OMSEC) said given foreign currency shortages, lower disposable incomes and high inflation, there were chances that merchandise supply bottlenecks may become more pronounced on the one end while demand for traditional products will slow on the other.
“This may result in a sales volume decline whilst the nominal sales revenue figure may continue going up underpinned by the in-store inflation on products sold,” the research firm said in an analysis of OK Zimbabwe financial results for the year to March 31, 2019.
During the period under review, Zimbabwe’s largest supermarket chain saw return on shareholder equity surging to 51,1 percent due to an improved net profit margin and equity leverage.
OK Zimbabwe’s recovery in net margin was supported by the absolute revenue growth of RTGS$219 million versus lower cost growth of RTGS$175 million.
This was achieved by ensuring that the most significant cost pressure points were maintained at a lower growth rate than the revenue growth of 37,6 percent. The most significant cost for OK Zimbabwe is in the procurement of merchandise which accounted for 76 percent of total costs for their year to March 2019.
Merchandise cost growth was only 21 percent versus the aforementioned revenue growth. A higher equity leverage of 3,17 compared to 2,21 assisted in the return on equity firming up as property, plant and equipment revaluations, greater inventory and higher cash holdings all contributed towards the firmer equity leverage.
OMSEC said the giant retailer’s management focus seems to be on defending their market share and remaining profitable as their strategy entails maintaining cordial relationships with their suppliers, continuing to expand the OK Store footprint and improving their operational efficiencies to keep costs low.
Currently OK Zimbabwe has 64 outlets comprising of 49 OK stores, eight Bon Marche Supermarkets and seven OK Marts all of which are distributed around the country’s urban, peri-urban and tourist areas.
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