MEIKLES Limited’s supermarket business saw sales volumes retreat by 28% and 24% for the quarter and nine months ended December 2019, respectively, as disposable incomes continue to decline.
Since reintroduction, the Zimbabwean dollar has continued to devalue as the country lacks adequate foreign currency and market confidence, resulting in wage erosion.
“Sales volumes retreated by 28% and 24% for the quarter and nine months respectively compared to the same period last year. The stores are reasonably stocked despite challenges in supply chain arising from shortages of foreign currency,” said Meikles Limited company secretary Thabani Mpofu, in a trading update for the quarter and nine months ended December 2019.
“Trading during the quarter ended December 2019 was impacted by weak domestic demand as high inflation continued to erode disposable incomes. In addition, shortages of foreign currency as well as intermittent supply of both fuel and electricity disrupted production and availability of goods in the economy. Sales volumes across the Group’s operations were adversely impacted by the above factors.”
Meikles operates its supermarkets through TM Pick n Pay stores, a partnership that the firm has with South African retail giant, Pick n Pay. Meikles supermarket business contributes nearly 95% to the group’s total revenue.
When the Zimbabwean dollar was first introduced as the RTGS dollar in February 2019, the exchange rate was pegged at US$1:RTGS$2,50.However, following the local currency being reintroduced as the sole legal tender in June that same year, the foreign currency exchange rate has fallen to the current US$1:ZW$18,20.
On the parallel market, the foreign currency exchange rate stands at US$1:ZW$29.
This has greatly ereded the value of wages and consumer spending.Despite this, Mpofu said in inflation-adjusted terms, revenue from continuing operations increased by 23% and 14% (475% and 335% in historical cost terms) for the quarter and nine months respectively.
“The increase in revenue is ahead of the percentage increase in operating costs for the nine months and as a result, profit growth is above revenue growth,” he said.
Under its agricultural business, bulk tea production declined by 20% and 23% for the quarter and nine months respectively due to intermittent electricity supply that reduced both irrigation and factory operating hours.Meikles is working on a solar power plant.
“Bulk tea export sales of 1 514 tonnes for the quarter were 53 tonnes below tonnes sold during the same period last year. For the nine months, bulk tea export sales were 5 183 tonnes compared to 5,206 tonnes in the comparative period of last year,” Mpofu said.
Volume of tea and coffee sales to the domestic and regional markets reduced by 21% and 20% for the quarter and nine months, respectively.
From its hospitality segment, Mpofu said room occupancy retreated by 9,32 and 6,18 percentage points for the quarter and nine months respectively, from the 2018 comparative, in Victoria Falls.
In Harare, room occupancy declined by 4,86 and 6,74 percentage points for the quarter and nine months, respectively, compared to 2018.