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Oliver Kazunga, Senior Business Reporter
RETAIL giant, OK Zimbabwe has reported about 90 percent decline in profit  before tax at $1,2 million for the year ended 31 March 2016 compared to $10,6 million in the prior year as low aggregate demand continues.

During the period profit after tax dropped drastically from $7,5 million recorded in the prior period to $700,000.

In a statement accompanying results of the country’s largest retail chain, the chairman David Lake said: “Revenue generated for the year decreased to $437,5 million from the $462,7 million posted in prior year. Profit before tax was down to $1,2 million from $10,6 million in the previous year, while profit after tax decreased to $0,7 million from $7,5 million in 2015,” he said.

Faced with a difficult operating environment, he said the group posted a decline in revenue and profitability.

“Gross margins softened in a market whose consumption is increasingly weighted towards low margin basic products and which is experiencing ever-increasing competition,” he said.

Lake said although the group’s operating costs declined during the period under review, the reduction was not significant to counter the negative effect of lower sales and gross margins.

Overheads decreased to $69,6 million from $72 million in the previous year as company-wide measures to contain costs were implemented. The cost of borrowing remained low at $0,33 million.

OK Zimbabwe’s gross margin during the period under review was at 16.1 percent compared to 17.8 percent in 2015.

This was largely attributed to product mix and significant mark-downs during promotions and obsolete stock.

The group’s capital expenditure for the financial year was $4,4 million compared to $11,2 million last year.

During the year under review, the group opened two stores namely OK Zvishavane and OK Mart Mutare.

“The contribution from these stores is encouraging. In the process of rationalising operations, OK Value Nkulumane in Bulawayo was closed as it had remained unviable.”

The group has resolved that no dividend would be declared this year as the resources would be channelled to re-investment in the business.

On the outlook, Lake said: “Despite the difficult economic environment, the group will take the necessary steps to improve margins without losing market share. Focus will be on further cost reductions to improve profitability…

“Notwithstanding the challenging operating environment, the board and management remain confident that the continued loyalty and support of our employees, shareholders, suppliers and customers will be rewarded.”