HARARE – One of Zimbabwe’s largest supermarket group, OK, says it has taken steps to improve its profit margins through refurbishments and opening new stores to ward off stiff competition from other retailers.
The listed company, which saw its profits tumbling to $0,7 million in the full year to March 2016 from $7,5 million a year earlier, said it will also focus on further cost reductions to maintain market share and improve profitability.
“To continue enhancing brand strength and improve sales growth, the group will embark on full scope refurbishment of OK First Street,” OK chairman David Lake said yesterday, adding that partial refurbishments will also be carried out at the group’s stores in Gwanda and Kwekwe.
“New OKmart stores will be opened in Gweru and Victoria Falls, while operations at Houghton Park in Harare and Chipinge will move into larger stores already under construction. A new OK Value store will also be opened in Waterfalls,” he added.
This comes as local retailers are facing a decline in revenue as a result of limited and constrained consumer disposable incomes.
Faced with worsening economic conditions, consumers are now turning to low-priced goods and low-cost outlets have taken advantage of a change in consumption patterns and are thriving at the expense of established retailers like OK and TM supermarkets.
Lake noted that persistent economic headwinds continued to affect business operations as reduced Diaspora remittances, liquidity constraints, business failures and remittances along with nonpayment of salaries had been felt in the financial year under review.
“Under the difficult conditions, the group posted a decline in both revenue and profitability.
“Gross margins softened in a market whose consumption is increasingly weighed towards slow margin products and which is experiencing ever-increasing competition,” he said.
Revenue generated in the period under review decreased to $437,5 million from the $462,7 million posted in prior year.
“Profit before tax was down at $1,2 million from $10,6 million in the previous year.
“The reduction in gross margin as a percentage of sales had a significant impact on the profitability achieved,” he said.
The group’s overheads decreased to $69,6 million from $72 million in the previous year as measures to contain costs were implemented.
At $303 000, the cost of borrowing remained low with capital expenditure at $4,4 million, down from $11,2 million in prior year as the group relied primarily on internally generated cash flows to fund its assets.
The listed supermarket group did not declare a dividend and said it would channel resources to re-investment in the business.