OK Zimbabwe faced a tough Q3 2024

Moreblessing Cherayi

Zim Now Correspondent

OK Zimbabwe Limited encountered a tough trading environment in the third quarter of 2024, primarily due to reduced consumer spending, local currency devaluation, and liquidity shortages.

In its trading update for the quarter ending December 31, 2024, released on February 14, the company highlighted key operational challenges, including stockouts caused by supply constraints and rising costs driven by power outages that led to temporary branch closures.

Group Company Secretary Margaret Munyuru noted that the subdued operating environment was largely due to lower-than-expected consumer spending and severe liquidity shortages in the local currency.

The Zimbabwean dollar (ZWG) suffered a sharp devaluation in September 2024, as authorities attempted to stabilize the exchange rate system. This devaluation nearly doubled OK Zimbabwe’s U.S. dollar-denominated liabilities, exacerbating financial pressures.

Throughout the quarter, the company struggled with product availability, with daily stocking levels averaging only 50% of normal levels. Stock shortages stemmed from supply constraints, worsened by supplier demands for foreign currency payments and restrictive trading terms, including prepayments for locally invoiced supplies.

The company also faced challenges meeting its U.S. dollar-denominated creditor obligations, as foreign currency sales revenue sometimes fell to just 20% of total sales.

Frequent load shedding disrupted operations and increased costs, forcing the company to rely on alternative power sources. To manage rising expenses, OK Zimbabwe closed four branches in Glen Norah, Kuwadzana 5, Chitungwiza Town Centre, and Manyika Street, all in Harare. The company is also evaluating the future of branches with unsustainable operating costs and licensing constraints.

Sales volumes for the quarter dropped 36% year-over-year, though the company recorded a 10% growth on a year-to-date basis. The quarterly decline led to a corresponding 36% revenue reduction compared to the previous period.

To address supply chain disruptions, OK Zimbabwe is actively restocking with support from suppliers and financial institutions. The company is also exploring alternative procurement models, including structured stock supply arrangements with third-party suppliers.

Looking ahead, the company remains committed to stabilizing its inventory levels before the financial year-end. However, its long-term performance will depend on economic stability and favorable policy adjustments to improve market conditions.

“The fortunes of the country’s formal retail sector are hinged on the stability of our exchange rate regime,” Munyuru stated.

OK Zimbabwe continues to adapt its strategies in response to ongoing economic challenges, aiming for a more resilient operational framework in the coming months.