Furnmart negatively affected by tough trading conditions
- Zambian operations to close this year
- More stores could be shut down
The Botswana Stock Exchange listed furniture retailer, Furnmart Group could close some of its stores following the tough trading conditions in countries in which it operates.
Furnmart Group which operates Furnmart stores and Home Corp stores in Botswana, South Africa, Namibia and Zambia, failed to pay around P1 million tax and dividends to its shareholders for the financial year 2016.
The company is worried that drought conditions, currency weakness, high unemployment, an increase in retrenchments and over-indebtedness of its customers, negatively affects performance of its stores. According to the company’s 2016 financial statements, revenue declined from P1.2 billion in 2015 to 1.1 billion in 2016 due to lower sales of goods in this country. The company recorded positive sales growth in all countries, with the exception of Botswana. Profit for the year declined from P56 million in 2015 to P47 million in 2016, primarily as a result of higher debtors’ costs. “Potential job losses due to the closure of some of Botswana’s bigger national mines have necessitated an increase in the debtors’ impairment provision. These factors have contributed to an increase of 22.3% in total debtors’ costs during the year,” said the company. Foreign exchange losses increased from P12.8 million to P16.9 million in 2016.
“Continued trading losses, a weakening economy, US Dollar-based rentals and a volatile currency have culminated in management’s decision to cease trading in Zambia. The Company commenced the winding up of the Zambian operations on the 1st of November 2016 and the company will cease operations in the country in the financial year 2017,” Furnmart Group said.
Furnmart Group stated that active measures were being taken to stem losses from the Group’s non-performing business units. “Loss-making branches will be closed, and where viable, non-performing stores will be subjected to a turn-around strategy. Management is confident that these measures will have a positive impact on future profitability of the Group,” they said.
Furnmart has indicated that furniture retailers have gone through tumultuous times during the financial year and challenges in the industry persist as regulators continue to introduce burdensome restrictions and administrative processes on consumer credit providers, in an attempt to protect consumers from risky or unfair exposure.
The company has noted that despite the challenging environment, the company continues to trade steadily. The company has added that the outlook for the regional economies remains uncertain and trading conditions are likely to remain subdued for the foreseeable future.
Furnmart has a market cap of 442,705,638 and the company shares were trading at 70 thebe per share, last week with the highest price of 109 thebe in the last 12 months.