Erosion of disposable income hits Meikles
BUSINESS REPORTER
Meikles Limited has been severely impacted by low consumer spending power in the 11 months to February 2023, largely caused by a weakened Zimbabwe dollar, the company has said.
In a statement accompanying the financial results for the 11 months to February 2023, Meikles chairman John Moxon said the company was reeling under diminished demand.
Consequently, profit for the group dropped to ZWL$3.09bn in the reviewed period from ZWL$8.10bn reported in the prior comparative period.
“The economy faced elevated levels of inflation, depreciating exchange rate and rising interest rates during the period under review. The resultant impact was reduced disposable income and contraction in consumer demand,” Moxon said.
Revenue for the group, however, grew to ZWL$278.9bn from ZWL$191.7bn representing a 45% increase.
“Growth in sales units was achieved at the supermarket segment under tough operating conditions characterised by declining customer disposable income during the greater part of the period under review. Gross profit margin decreased by two percentage points to 23% from 25% in the previous year, partly reflecting the impact of the supermarket segment’s strategic thrust on responsible pricing to support customers during the challenging times,” he said.
Moxon said the sales mix was dominated by grocery items that have low margins and the group net operating costs increased by 63% to ZWL$67.1bn from ZWL$41.3bn.
The group reviewed employee remuneration on a regular basis to cushion employees from the rising cost of living.
Consequently, employee costs increased by 64% and were 50% of total operating costs.
In addition, the increases in costs denominated in foreign currency, as well as electricity and water, were ahead of revenue growth.
Capital expenditure during the period under review was ZWL$7.9bn and was all financed from internally generated cash flows.
The group had strong levels of liquidity and solvency at the end of the reporting period.
The current assets ratio was 1.74 times up from 1.62 times in the previous year. Debt-to-equity ratio was flat year-on-year at 9%, according to Moxon.
Lease liabilities for the various store leases accounted for 84% of the total debt.
