Pick n Pay is reporting some revival in sales, after volumes fell by 10% in the half-year to August, but says it is banking on a change to the currency policy to sustain recovery.
Results from the country’s two largest supermarkets are currently being closely watched, as they reflect the impact of government’s exchange rate policy on formal businesses. While US dollar sales make up just 20% of Meikles’ supermarket business, forex earnings are as much as five times more in its other operations.
“Units sold declined by 10% due to depressed consumer demand in June and July. On a positive note, we have witnessed a recovery in units sold after 31 August 2023. Units sold in September 2023 were 15% above the same month of last year,” according to the latest report by Meikles, which holds 51% of Pick n Pay in Zimbabwe.
USD sales are just 20% of sales at Pick n Pay, at par with what rival OK is earning in forex sales. This is at a time when much of the economy is now using USD. This is because shoppers prefer informal traders, who are not forced to sell goods at the official rate, making their goods cheaper.
Says Meikles: “The main impediment to the growth of foreign currency revenue was the controlled in-store exchange rate on formal retail. The recent recommendation by Monetary Authorities to lift the cap on the instore exchange rate will augur well for the formal retail sector if implemented.”
Pick n Pay has just opened two new stores, one in Gwanda and the other in Harare.
The contrast between supermarkets and other businesses is reflected by income from Meikles’ other businesses; hotels and properties. Meikles’ hotel business – made up of 50% of Victoria Falls Hotel – grew its revenue by 48% in USD terms. This was due to an 11-percentage-point increase in room occupancy and a 9% increase in the average room rate. Meikles earned 96% of its hotels revenue in foreign currency.
From its property portfolio, Meikles is now getting 70% of its rentals in USD, up from just 20% this time last year. It switched five out of seven leases from Zimdollar to USD rentals, while the remaining two are pending.