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The Effects of Zimbabwean Dollar Depreciation on Financial Performance and Profitability Metrics of Formal Retail Firms

Author

Listed:
  • Takunda Gwyneth ZARANYIKA

    (Midlands State University, Gweru, Zimbabwe)

  • Newman WADESANGO

    (University of Limpopo, Polokwane, South Africa)

Abstract

This research offers an original quantitative analysis of the effects of Zimbabwean dollar depreciation on the financial performance and profitability metrics of formal retail firms, using OK Zimbabwe as a case study. Distinct from previous studies, it uniquely investigates the financial impact of the gap between the official and parallel market exchange rates, an issue that severely disadvantages formal retailers forced to operate at the less favorable official rate. This misalignment inflates costs, distorts pricing structures, and reduces competitiveness against informal retailers. The study’s primary aim was to assess how currency depreciation affects profitability indicators such as revenue, operating margins, and customer retention. A descriptive research design was employed, using structured questionnaires to collect data from 50 customers, one branch manager, and two informal retailers. Data analysis was conducted using IBM SPSS, advanced Excel formulas, and content analysis of published financial statements and social media reviews to identify trends and financial implications. The main finding reveals a statistically significant negative correlation (r = –0.71) between Zimbabwean dollar depreciation and key profitability indicators, including a 23% decline in average monthly revenue and a 17% drop in operating margins for OK Zimbabwe between 2022 and 2024. Customer retention also decreased by 29%, attributed to price instability and poor value perception compared to informal competitors. Meanwhile, informal retailers reported a 34% growth in sales volumes due to pricing flexibility aligned with parallel market rates. These results highlight the direct financial disadvantage faced by formal retailers under dual exchange rate regimes in hyperinflationary economies. This study contributes to the financial literature by quantitatively linking exchange rate instability with firm-level financial outcomes in hyperinflationary environments.

Suggested Citation

  • Takunda Gwyneth ZARANYIKA & Newman WADESANGO, 2025. "The Effects of Zimbabwean Dollar Depreciation on Financial Performance and Profitability Metrics of Formal Retail Firms," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 6(10), pages 52-70, October.
    • Handle: RePEc:ahd:journl:v:6:y:2025:i:10:p:52-70
    DOI: 10.37945/cbr.2025.10.06
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    References listed on IDEAS

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M49 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Other

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