The macro-economic environment continued to deteriorate as evidenced by declining consumption and continuing falling product prices. Net sales for the quarter were lower than budget and declined against prior year by 7.5%. While the company’s biggest promotion, The OK Grand Challenge Jackpot Promotion was a success, sales generation on either side of it was poor leading to overall subdued performance for the quarter to June 2015. In addition, margins are under pressure as retailers compete for sales and consumers search for low prices.
Management efforts to stimulate sales continue in earnest and these include expanding the OKmart wholesale operation to locations where the brand is not represented as well as converting some OK Conventional stores to the newly launched OK Value brand whose thrust is to capture more customers at the value end of the market where we have seen opportunities. Recognizing the reality of the economic downturn with the resultant negative impact on revenue generation, measures to reduce overheads have been intensified and controls over shrinkage enhanced to ensure that the business remains profitable.
The trans-border initiative we started two years ago with Kawena (Pty) Limited of South Africa has picked up significant pace and we expect to increase sales through conversion of the remittances collected under the arrangement. The financial services operation continues to grow and is expected to make a meaningful contribution to profit.
Given the subdued business performance, our capital expenditure programme will be rationalized to start where growth opportunities are clearer and effect essential replacements.
Despite the difficulties, the management believes that the current efforts to deliver reasonable performance and to exploit growth opportunities will yield positive results.