Pick n Pay says its share of earnings from Zimbabwe fell by 55.8% in the past six months, hit by inflation and exchange losses.
The South African company holds 49% of TM Pick n Pay, with its partner Meikles holding the majority stake.
“The Group’s share of TM’s earnings, before any hyperinflation net monetary adjustments, declined 55.8% year-on-year to R44.1 million. A hyperinflation net monetary loss adjustment of R43.0 million resulted in the group’s share of TM’s reported earnings declining to just R1.1 million,” Pick n Pay says in its results for the half-year period to August.
The sharp fall of the Zimbabwe dollar affected the company’s accounts when profits were translated into Rand. Dividends have therefore fallen by more than half while the value of the 49% stake has also taken a big hit.
Says Pick n Pay: “The Group received a R6.6 million dividend from TM in this period (R16 million in H1 FY23). The investment is currently valued at R33.1 million (R72.4 million at February 2023).”
In its full year results to February, Meikles reported that sales volumes at Pick n Pay were up only 2% from the previous year, reflecting weak consumer spending.
The company has 73 outlets in Zimbabwe, at par with its rival OK Zimbabwe.
Zimbabwean retail companies are facing a major crisis, as shoppers desert them for cheaper informal traders. This is because formal shops are required to use the formal exchange rate when they price their goods, which makes their shops expensive for customers at a time when many have increasingly little money to spend.
Recently, OK Zimbabwe warned of the “forced death” of formal retail. While informal traders do not pay taxes and can sell exclusively in US dollars, formal retailers have to comply with tax and exchange laws making them less competitive. Wholesaler Metro Peech & Browne recently went into corporate rescue, citing competition from informal traders and the exchange rate as some of the reasons for its troubles.