What retailers financials say about the state of Zimbabwe’s economy

What retailers financials say about the state of Zimbabwe’s economy

By Simbarashe Zishiri, HARARE, May 31 (The Source) – Zimbabwe is good for business. Retail business.

The country is frequently listed among treacherous economies where only intrepid investors dare tread, but those who have bet on Zimbabwe’s retail sector appear to be extracting good value.

This is borne out by the largest retailers operating in the country: OK Zimbabwe, TM Supermarkets and Choppies all of whom are delivering good value to their shareholders after impressive performances according to recent financial results.

OK Zimbabwe, the largest grocery chain with 63 outlets, last week reported an after tax profit of $6,06 million, a growth of 801 percent  from the $672,29k recorded previously, while earnings per share (EPS) advanced 768 percent to 0,52 cents.

Revenue grew eight percent to $472,4 million in the full year to March 31.The revenue for FY 2017 is the third largest haul for OK, following the peak of $483,7 million in FY2014 and $479,6 million in FY2013.

South Africa’s retail giant Pick n Pay says its Zimbabwe associate, TM Supermarkets (TM)’s earnings grew 74,7 percent on last year to R80,2 million ($6,2 million)  in the full year to February 26,  representing growth in local currency terms of 71,8 percent. TM Supermarkets now has 56 stores in Zimbabwe, 16 of which trade under the Pick n Pay banner.

Additionally, Botswana Stock Exchange-listed supermarket retail chain Choppies says its Zimbabwean operation, with 30 outlets, recorded an annual revenue of $117,44 million for the full year 2016.

Another company in a similar space, Simbisa Brands, which operates quick services restaurants in Africa, also recorded the same impressive performance in its Zimbabwe operation, with revenue for the six months to December at $48,9 million,  registering a seven percent increase in customer counts.

OK Zimbabwe vs regional peers

By comparison, Kenya’s largest supermarket chain, the privately-owned Nakumatt, averages $700 million in annual sales operating in a $53 billion economy and serving a population which at 46 million, is nearly four times Zimbabwe’s.

Another regional peer, a leading listed supermarket in Botswana, Choppies, reported annual revenue of $718,93 million for the full year 2016 and net profit of $10,23 million. However the group operates a total of 192 stores in six countries namely Botswana, South Africa, Zimbabwe, Kenya, Zambia and Tanzania. Choppies operates 30 stores in Zimbabwe.

Additionally, Africa’s biggest supermarket group, Shoprite, in its full-year to June 2016, pulled in $1.7 billion revenue from its more than 300 stores across the continent, including Nigeria, Zambia, Namibia, DRC, Mozambique and Botswana.

OK Zimbabwe’s net profit margins are, however, lower compared to its peers, partly owing to high operating costs relative to its peers. For instance,Botswana Stock Exchange-listed supermarket retail chain Choppies and South African Pick n Pay recorded net profit margins of 1,42 percent and 1,57 percent respectively while Ok Zimbabwe recorded a 1,28 percent profit margin.

Analyst’s view

Zimbabwe supermarkets operate in a market which is still significantly underpenetrated in terms of formal retail but face competition from an explosion in informal commerce.

As such, the performances of these supermarkets indicate that despite the sluggish outlook, Zimbabwe is a high performing economy which could get even better with the right policies.

The high retail sales, to a certain extent point to a potentially healthy economy or that Zimbabwe has high consumer spending, taking into consideration that  the big three grocery chains only have a combined 149 outlets across the country.

Performances of listed companies in non-food sectors, however, paint a picture of a depressed economy weighed down by low disposable incomes, the dollar note shortage and high levels of unemployment.

  • Nigel Gambanga

    Interesting piece. Zimbabwe’s consumptive economy is a reason to smile for investors. The same trends highlighted for Simbisa are more or less reflected in two major counters on the SE – Econet & Delta. Both push “FMCGs” of sorts. Long and short of it is consumers will talk, eat and drink in any economy so investment in such equities has a sweet return. Not to take anything away from these players’ well established footprints and brand values but it’s also worth noting the effects of the cash crisis in boosting turnover for these entities. All of the major Zimbabwean retail chains mentioned are earning a ROI on payments infrastructure which dwarfs –
    at least in terms of reliability – anything that informal retailers have been trying to cobble together in the past year.
    Isn’t there also the nature of “our currency” the USD to consider when comparing regional variances? Not to mention the effects of an import economy and inefficient local production both of which result in prices that have oft been called out as steep?