LOCAL retail giant, OK Zimbabwe has admitted to frequently increasing its prices as a result of the fall in the value of the local currency.
BY TATIRA ZWINOIRA
In the retailer’s recent financial results for the six months ended September 30, 2019, OK Zimbabwe chairman Herbert Nkala said the trading environment had become progressively more unstable towards the end of the period under review.
“The group’s stores remain reasonably stocked for the festive season and beyond. While price increases have been frequent because of the instability in the market, the group will continue in its efforts to deliver the best possible value to its stakeholders,” he said.
“The scarcity of foreign currency slowed down the importation of goods and this, combined with high prices of goods that were available, slowed down consumption, particularly in the second half of the reporting period. Resultantly, volume sales declined by 23% compared to the same period last year.”
Nkala said since the reintroduction of the Zimbabwe dollar, in June, the currency had depreciated markedly and contributed significantly to price increases in the period under review.
With the Zimbabwe dollar being the sole legal tender, businesses are increasing their prices to raise enough money to buy foreign currency to import more stock.
As a result, OK Zimbabwe’s financial performance for the period was inflationary.
Nkala said the group’s revenue for the half year improved by 237,4% to close the reporting period at $1,1 billion, having increased from $330,1 million in the comparative period.
“Profit before tax of $185 million was 1 498% up on prior year’s $11,6 million, while profit after tax increased by 1 463,5% to $131,9 million from $8,4 million in prior year. Overheads growth was restricted to 229,1% which is below the revenue growth of 237,4%,” the retail outlet chair said.
“Overheads increases were attributable to, among others, fuel for generators and vehicle fleet, repairs and maintenance costs, staff costs, bank charges, contingent rentals and interest on lease liability arising from the adoption of International Financial Reporting Standard 16 (IFRS 16), Leases.”
Nkala said the cost lines that increased most significantly were those corresponding directly with sales generated as well as those that have import components.
“Capital expenditure for the period was $51,5 million, up from $7,5 million for the comparative period as the group continued with its refurbishment programme,” he added.
Consumers have been struggling to buy from retailers as the devaluing Zimbabwe dollar has eroded disposable incomes and wages.