OK Zimbabwe's latest trading update signals that OK has run out of options. With plummeting sales, overdue creditors, and mounting debt, this deep dive explores the retailer’s financial troubles, the urgent need for a bailout, and possible next steps.
I actually think the 4th quarter will be the worst remember it's when it largely became public that thinks we're cooking @ OK ZIM. If it's the period Jan-March... They are still in the worst phase of it. Also remember the brand has suffered significantly. I did some window shopping today and fou d some ques in Spar and TM however OK ... You would think no one was in despite the Restocking. The Brand took a hit. Big hit. They'll need time.
I found it curious that the OKZ trading update says both volumes and revenue fell by 36%. No reference made to the impact on revenue, of internal price inflation- a measure of how in-store prices changed during the trading period. A 36% volume decline should not necessarily result in same revenue decline, if OKZ management know what they are doing.
I eagerly await to read OKZ 4th quarter trading update-along with their year-end results for the year to March. If thier daily (stock) availability levels were 50% during the 3rd quarter, then definitely thier 4th quarter stock availability levels should turn out much worse. Retail is a volumes game, so I would expect OKZ to report on the impact of stock availability levels on their inventory or stock turnover ratios, rather than updating on daily stock availability levels only.
In the end, I agree with you Tinashe, its game over for OKZ. I don't see how closing just 5 locations will in any way help OKZ with the many challenges they are facing.
OKZ is treating symptoms of an advanced disease... I bet they need to be more aggressive... Very aggressive and not look back. They need something like a Darth Vader on Mgt ... To sacrifice a few heads for the good of the rest.
I picture a situation where Mega Market step in with Cash in exchange for a larger cut of the overall business, and asking for non performing branches to be dropped while keeping flag ship branches
Hadn't thought of that angle. Although they also got burnt by Truworths and also are the second largest shareholder in Meikles (TM Pick N Pay) so maybe hesitant to strike.
Interesting read . OKZ definitley need a bigger brother which seem unlikely at the moment. Their issues also run deep . They seem to have more top brass directors and managers which should be pruned. Their issue runs deep from poor management to economic challenges. Another questionable decision is the Allowel pharmacies. Why would they opt to open a group of pharmacies in 2022 when zim had over 1500+ pharmacies when they could have easily done that in 2013 when there were around 200+ pharmacies in ZWE? . Are they trying to say that pharmacy business is more profitable in 2025 than in 2012? where the economy was dollarized ?
I'll have to see that one. I live in Westgate, the one there is now filling isles with Coke zero 2 liter bottles to disguise the empty shelves. I heard similar stories about Chisipiti branch.
It is quite interesting that retailers are struggling whilst the primary manufactures are still managing, albeit in a difficult environment. Looking at the OK Zimbabwe figures shows that the manufacturers and/ suppliers had become de facto banks for sources of working capital.
The advantage manufacturers have is they can sell goods in the informal market, where they get USD. Retailers don't have that flexibility. Also, retailers depend a lot on credit from suppliers, which works well in an environment with stable currency.
Keen to know their wage bill, especially that of the executives. Also a through audit of any contracts above 500k and those untimely acquisitions need to be done. Shareholders need to become activists and stop being docile while shareholder value is being creamed off by management
I think in 2022 government was proposing some legislation which would have greatly benefitted them if it had been passed, I dont remember the particulars but I remember my then pharmacist girlfriend being quite distressed about the whole situation.
The gist of what i remember was that it would have benefitted larger corps and parastatals and weeded out independent operators.
Thanks for the comment.
Solid observations.
Also keen to see their 4th quarter results. I think by then they should have made some significant changes.
They also need to prepare for the grand challenge and with their situation hard to see how it can work without huge changes.
I actually think the 4th quarter will be the worst remember it's when it largely became public that thinks we're cooking @ OK ZIM. If it's the period Jan-March... They are still in the worst phase of it. Also remember the brand has suffered significantly. I did some window shopping today and fou d some ques in Spar and TM however OK ... You would think no one was in despite the Restocking. The Brand took a hit. Big hit. They'll need time.
I found it curious that the OKZ trading update says both volumes and revenue fell by 36%. No reference made to the impact on revenue, of internal price inflation- a measure of how in-store prices changed during the trading period. A 36% volume decline should not necessarily result in same revenue decline, if OKZ management know what they are doing.
I eagerly await to read OKZ 4th quarter trading update-along with their year-end results for the year to March. If thier daily (stock) availability levels were 50% during the 3rd quarter, then definitely thier 4th quarter stock availability levels should turn out much worse. Retail is a volumes game, so I would expect OKZ to report on the impact of stock availability levels on their inventory or stock turnover ratios, rather than updating on daily stock availability levels only.
In the end, I agree with you Tinashe, its game over for OKZ. I don't see how closing just 5 locations will in any way help OKZ with the many challenges they are facing.
Mike Mandaza, Harare.
OKZ is treating symptoms of an advanced disease... I bet they need to be more aggressive... Very aggressive and not look back. They need something like a Darth Vader on Mgt ... To sacrifice a few heads for the good of the rest.
I picture a situation where Mega Market step in with Cash in exchange for a larger cut of the overall business, and asking for non performing branches to be dropped while keeping flag ship branches
That's a really interesting perspective!
Hadn't thought of that angle. Although they also got burnt by Truworths and also are the second largest shareholder in Meikles (TM Pick N Pay) so maybe hesitant to strike.
Yeah I remember when Truworths flopped, they had put in a fair bit.
although they do have the cash to burn
Interesting read . OKZ definitley need a bigger brother which seem unlikely at the moment. Their issues also run deep . They seem to have more top brass directors and managers which should be pruned. Their issue runs deep from poor management to economic challenges. Another questionable decision is the Allowel pharmacies. Why would they opt to open a group of pharmacies in 2022 when zim had over 1500+ pharmacies when they could have easily done that in 2013 when there were around 200+ pharmacies in ZWE? . Are they trying to say that pharmacy business is more profitable in 2025 than in 2012? where the economy was dollarized ?
Pharmacy business is really really competitive.
Also think will be hard for them to win in that space.
If there's still a flagship branch
The Bon Marches are still there e.g. in Borrowdale
I'll have to see that one. I live in Westgate, the one there is now filling isles with Coke zero 2 liter bottles to disguise the empty shelves. I heard similar stories about Chisipiti branch.
It is quite interesting that retailers are struggling whilst the primary manufactures are still managing, albeit in a difficult environment. Looking at the OK Zimbabwe figures shows that the manufacturers and/ suppliers had become de facto banks for sources of working capital.
The advantage manufacturers have is they can sell goods in the informal market, where they get USD. Retailers don't have that flexibility. Also, retailers depend a lot on credit from suppliers, which works well in an environment with stable currency.
Keen to know their wage bill, especially that of the executives. Also a through audit of any contracts above 500k and those untimely acquisitions need to be done. Shareholders need to become activists and stop being docile while shareholder value is being creamed off by management
In general not much shareholder activism for sure.
I am still not sure what went wrong. The environment is brutal but the drop off relative to others seems to suggest some big misstep.
All my hopes of getting a car this year were pinned on the OK Grand Challenge. Am I cooked? 🥺
Well seems alot of people in general been getting cars for free. So maybe will come from another source 😀
Passive investers might have not challenged enough. Seedco is another entity that needs to be tracked
Thanks for the comment. Haven't looked at Seedco. Are they having issues?
I think in 2022 government was proposing some legislation which would have greatly benefitted them if it had been passed, I dont remember the particulars but I remember my then pharmacist girlfriend being quite distressed about the whole situation.
The gist of what i remember was that it would have benefitted larger corps and parastatals and weeded out independent operators.
Another great piece. Well done.
Please do cover ART next.