Whether it is a young couple, single professionals, or a family looking for new furniture and electronic appliances, TV Sales & Home (TVSH) often comes to mind as a preferred choice. This is largely due to its strong brand presence and expansive retail network, now comprising 60 branches nationwide, including four Bedtime Store outlets.
The group has its own manufacturing arm, Restapedic, which produces beds, and has recently integrated Legend Lounge under this division to better withstand competition from the informal sector. For the six months ended December 31, 2024, TVSH recorded 6% increase in volumes driving a corresponding 6% growth in turnover.
The value chain from manufacturers or suppliers to retailers is often overlooked. It encompasses sourcing products, managing inventory in warehouses, coordinating logistics and delivery, and maintaining strong relationships with both suppliers and customers. Distribution Group Africa (DGA) plays a pivotal role in this space, operating across Zimbabwe and the broader region, particularly in Malawi and Zambia.
In Zimbabwe, DGA faced a challenging half year, with revenue dropping by 25% and sales volumes declining by 28%. Zambia also saw a 4% reduction in turnover (in Kwacha terms), driven by a 19% drop in volumes. Only Malawi posted a positive performance, with turnover rising by 14% and volumes increasing by 5%, both in local currency terms.
Chances are, if you have spent any time looking for car parts or services, you have come across a Transerv retail outlet or fitment centre. The group has been on an aggressive expansion trajectory, now operating 54 retail outlets and 10 fitment centres nationwide.
Transerv being a key player in the sale of automotive spare parts and accessories, has also diversified into the solar energy space, a move that has significantly boosted revenue for this division. The surge in solar product sales, along with the opening of new branches, contributed to the group recording 27% increase in revenue, supported by a 4% growth in sales volumes.
You might be wondering why we briefly examined these three business segments. Together, they form the backbone of Axia Corporation, one of the leading players in Zimbabwe’s retail and distribution sectors, and notably, the only one in the sector which is listed on the Victoria Falls Stock Exchange. While much attention has been given to the challenges faced by formal retailers in the current economic climate, relatively little has been said about Axia specifically. It would be remiss not to delve into its financials and assess how the regulatory landscape, economic environment, and policy shifts have impacted its performance. Let us take a closer look at its operational results.
As a business that relies heavily on formal retail channels for market access, Axia was not spared from the challenges that affected the broader sector. A key issue was the continued instability of the exchange rate.
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On September 27, 2024, the Zimbabwe Gold (ZiG) was devalued by 43%, resulting in a financial loss of approximately US$2,287 million for the group. This loss stemmed from Treasury Bills held in ZiG, which the government issued in lieu of settling outstanding auction market funds in US dollars. Because these instruments were denominated in local currency, the devaluation effectively eroded 43% of their value, inflicting significant losses.
Despite recording a 2% increase in revenue — equivalent to US$2,426 million — these gains were offset by the financial losses. As a result, profitability margins declined, leading to lower earnings per share and reduced dividend pay outs compared to the same period.
The group generated US$7,192 million in cash from operations during the period, representing a 26% decline compared to the prior half year. This reduction was primarily driven by increased goods smuggling in the informal sector and longer lead times, as suppliers pushed for more favourable payment terms.
In the first quarter, the TVSH division experienced a notable decline in credit sales. Consumers increasingly opted for cash transactions due to widening exchange rate premium. Purchasing goods priced in US dollars on credit became more expensive, as the exchange rate premium meant customers would need significantly more ZiG to settle the same transaction, driving inflation in both local and foreign currency terms.
From a strategic standpoint, Axia Corporation remains focused on growth opportunities, particularly within the furniture and automotive spare parts segments, as well as expanding its distribution network through new agency partnerships.
These efforts are aimed at increasing product accessibility and delivering value to customers through efficient and affordable distribution channels. However, the operating environment continues to exert significant pressure on the business, with rising costs and economic instability posing ongoing challenges. Perhaps this difficult landscape is suffice to explain why other players in this sector have chosen to exit the Zimbabwean market lately.
Taimo is an investment analyst with a talent for writing about equities and addressing topical issues in local capital markets. He is an active member of the Investment Professionals of Zimbabwe community, pursuing the Chartered Financial Analyst charter designation.
