Regional furniture retail giant, Furnmart Limited, says its short term prospects will be affected by the high unemployment levels which continue to plague the region’s economy.
Group chairman John Mynhardt states in Furnmart 2014 Annual Report that maintaining sales growth will be a challenge in these circumstances and even more of a challenge with the imposition of stricter credit granting criteria.
The group expects more competition to emerge following the closure Ellerines as the expectation is that new competitors will surface in stores previously occupied by Ellerines.
“These will likely be more focused and competitive than Ellerines was able to be in the past years and it remains to be seen just how many of these stores will be occupied by furniture retailers and how much more, if any, of a competitive threat they will pose,” Mynhardt stated.
He, however, expressed optimism that there is likelihood the vacant shops will be converted to other retail use other than for furniture retail, therefore minimising competition to the group.
Furnmart, the only furniture retail outlet with its shares listed on the Botswana Stock Exchange (BSE), has bigger plans to counter the challenges.
In spite of the aforementioned challenges, the retail group believes there are some opportunities within the market that they are ready to take advantage of once identified.
The group is targeting to open 10 new stores this year but it will be very selective about any commitments.
The trading environment has seen Furnmart Profit after Tax (PAT) decline for several years now. In 2011 the group PAT stood at P109 million as compared to P71 million recorded in 2014. This is despite year-on-year increases in revenue over the last four years.
Furnmart, formerly Furniture Mart, attributes the shrink in profits to several factors. The group suffered P20 million foreign exchange losses on net receivables from its foreign operations occasioned by the continued strengthening of the Pula against South African Rand, the Namibian Dollar and the Zambian Kwacha.
The loss is more than double what the group incurred in the previous year which has been exacerbated by the growing size of the group’s foreign operations relative to the local business.
The tough market conditions caused the group to scale down its growth plans down and opened only six stores against the 10 projected new store openings. Instead the management focused on sales generation in the existing outlets, debt collection as well as increasing operational efficiencies.
Furnmart operates a series of furniture and electrical appliances shops in Botswana, South Africa, Namibia and Zambia. The retail giant targets two groups of customers through its subsidiaries of Furnmart, Xtreme stores and Home Corp.
Through Furnmart and Xtreme Stores, the group aims at middle to lower income market which covers the majority of the population whereas Home Corp stores targets middle to higher income market. Currently the group market capitalisation stands at more than P1.3 billion and by Friday Furnmart shares traded at 211 Thebe per share.