Staff Writer
HARARE, Retailer, Ok Zimbabwe says it has begun restocking its units across the country with support from supplier partners as well as financial institutions that continue to assist with short-term funding structures.
The company also said it has developed new alternative procurement models which include, but are not limited to, a structured stock supply arrangement with a third party for supplier assurance purposes as the business works to restore critical supply relationships with both local and foreign suppliers.
The group experienced episodes of stockouts during the quarter to December 31, 2024, and continued in the first two months of this year.
“This was evidenced by daily availability levels of around 50 percent of normal stocking levels, and these stockouts arose from restricted supplies from manufacturers and distributors,” the company said in a trading update for the quarter ended December 31, 2024.
The group said it is confident of restoring normal stocking levels before the closure of the current financial year.
During the period under review, volumes decreased by 36 percent in comparison to the same period last year. However, on a year-to-date basis, the group recorded volume growth of 10 percent over the same period.
The company noted that the reduction in volumes recorded during the quarter translated to a decline in revenue of 36 percent as compared to the prior period.
The group said it had outstanding and overdue creditors’ balances, which were predominantly denominated in US dollars against a backdrop of low US dollar sales collection, at times reaching as low as 20 percent of sales revenue.
The company noted that the low stocking levels are a direct manifestation of sub-economic pricing arising out of exchange rate distortions and suppliers’ need for foreign currency invoicing to cover their operational and raw material 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 business’ working capital and necessitated the need to access short-term funding,” it said.
Ok, Zimbabwe noted that the fortunes of the country’s formal retail sector are hinged on the stability of the exchange rate regime.
The company said consultations with both fiscal and monetary authorities have led to a relaxation of the very strict policing of applicable in-store exchange rates.
“The group welcomes the recently announced monetary policy statement measures, which removed a 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 towards a fully market-determined exchange rate system. Such a liberalised system will go a long way in restoring the competitiveness of the formal retail sector,” reads part of the trading update.
In terms of the operating environment, the company said the period was largely subdued due to lower-than-expected consumer spending in the quarter under review.
It said acute local currency liquidity shortages restricted access to the much-needed funding to cover working capital cycles across the formal retail sector.
The company said power outages worsened during the trading period, resulting in disruptions in business operations and increases in operating costs as the business relied more on alternative 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 Robson Manyika Street, all in Harare.”
The business said review and consideration of the future of branches saddled with the stifling impact of unsustainable operating cost structures and costly licensing requirements is in progress.
