LISTED hospitality and retail concern Meikles Limited says the in-store exchange rate policy remains an albatross on formal retail business, which is struggling to attain dollarisation levels being enjoyed by most businesses in the economy.
In a trading update for the third quarter ended November 30, 2023, the firm said this was creating ongoing supply chain challenges because suppliers are invoicing in United States dollars (US$) since the greenback is the preferred mode of settlement.
According to a survey on consumer spending conducted by the Zimbabwe National Statistics Agency (ZimStat), 80% of the transactions in the economy are now being conducted in US$, while the balance is in Zimdollar.
“In contrast, the percentage of revenue received in foreign currency by formal retailers is below 20% due to uncompetitive US dollar prices arising from compliance with the government’s in-store exchange rate policy,” Meikles said.
“There are ongoing engagements with monetary and fiscal authorities on changing the in-store exchange rate policy.”The central bank last year recommended that in-store exchange rate policy be scrapped, but Finance minister Mthuli Ncube ignored the request when he presented his 2024 national budget.
“The percentage of revenue received in foreign currency during the quarter and the nine months to date was below 20% despite an improvement from last year,” Meikles said.“This fell far short of the average of 80% per ZimStat’s consumer survey findings, primarily due to compliance with the in-store exchange rate policy. The in-store exchange rate policy remains an albatross on formal retail in attaining the dollarisation level reached by most businesses in the economy.”
In the supermarket segment, units sold and customer count increased by 5% and 2%, respectively, for the quarter compared to last year.This reversed the decline trend experienced in the preceding two quarters.
The decline in units sold for the nine months eased to 6% from the 10% reported for the six months to August 31, 2023.The company said the stores were relatively well stocked, hence the growth in units sold and customer count. Challenges were encountered in the range of stocks given the revenue split.
Room occupancy grew by five percentage points to 42% for the quarter from 37% achieved last year.The average room rate, in US dollar terms, was 13% above last year and, combined with the growth in room occupancy, resulted in a 29% growth in revenue per available room.Revenue per available room rose by 50% due to a room occupancy growth of 10 percentage points and a 12% increase in the average room rate.
Group revenue for the quarter under review of ZWL$613,1 billion was 128% above last year in inflation-adjusted terms.Inflation-adjusted group revenue for the nine months grew by 111% to ZWL$1,7 trillion, while in historical cost terms, group revenue increased by 701% to ZWL$1,2 trillion.The group’s liquidity remained strong despite the tightening of trading terms in the economy, which gives it leverage in a harsh trading environment.
The trading environment for the period under review was characterised by persistent depreciation of the local unit and a high use of the greenback in the economy.The exchange rate increased by 784% year-on-year, considerably increasing the cost of transacting in Zimdollars.
Meikles said the last quarter of the financial year commenced on a strong note, with the units sold by the supermarkets in December surpassing those sold the previous year.“Our focus is on strengthening the group operations’ capabilities to adapt to the evolving trading conditions,” it said.