ZIMBABWE’s TM Supermarkets — in which South African grocer Pick n Pay has a 49% stake — requires further funding to complete refurbishments and other projects that could significantly boost profitability and put it in a competitive position.
There is growing competition in Zimbabwe’s retail space, with OK Zimbabwe and Spar franchise operators raising their game in a race to boost earnings.
As a result, Pick n Pay’s Zimbabwean partner in the TM Supermarkets venture, Meikles, said on Friday that it was diversifying into mining to enhance its revenue-generating capacity.
Analysts have said the move to diversify into mining signals intensifying competition in the hotels and retail sectors where Meikles has operations. However, Meikles is expecting the TM Supermarkets division to consolidate its market-leading status based on an extensive branch network. OK Zimbabwe is the market leader in terms of earnings and revenues.
Moreover, with some of the stores being rebranded to Pick n Pay, it is expected that continuing and planned refurbishment will help the TM Supermarkets unit generate more revenue and profits.
"Forward planning suggests that TM Supermarkets will require further funding," Meikles chairman John Moxon said on Friday. The funding required will be used to "accelerate" the refurbishment exercise, while there are also plans to open "new supermarkets" in the foreseeable future.
Mr Moxon said TM Supermarkets "will focus on improving its merchandise mix to provide an improved offering to the public … and also focus on an improvement in gross profit percentage, which, although better than the previous year, is still below" the company’s expectations.
The already refurbished branches, including the first Pick n Pay-branded store in Harare, are, however, already generating "useful gross profits". Meikles said in August that the Pick n Pay-branded store had been well received by customers and was doing "exceptionally well", while three more Pick n Pay-branded stores are set to be opened before the end of the year.
Meikles said profits before taxation in the half-year period to the end of September amounted to $1.02m, compared with a loss of $7.04m incurred in the previous corresponding period. After-tax profits resultantly jumped to $767,000 against the loss of $5m in the same period the year before.
Moses Moyo, an independent analyst, said on Friday that prospects for Zimbabwean retail operators hinged on the ability to access funding as well as stronger product-sourcing capacity as the country’s manufacturers were struggling.
"There is a race to modernise stores and to offer shoppers a product mix that encompasses their requirements, and this has pre-viously not been available in Zimbabwe. The challenge now is to revamp the shops and to modernise them, and this requires funding," said Mr Moyo.
OK Zimbabwe reported last week that interim profits for the half-year period to end September jumped by 25.8% to $4.9m on firm revenue-generating capacity, despite the company continuing to import most of its stock.
During the interim period under review, OK Zimbabwe’s revenue grew by 24.6% to $231m, while after-tax profits amounted to $4.86m.