A Naivas branch in Nakuru. The retailer has announced fresh expansion plans. PHOTO | FILE
Naivas
Supermarket is investing about Sh470 million to expand its branch
network across the country as competition in the formal retail sector
intensifies.
The company recently acquired Nakuru-based
Rihab Supermarket for an estimated Sh70 million and is set to spend the
remaining Sh400 million in opening new stores in Thika, Kericho and
Nairobi’s Utawala, Kiambu Road, Kawangware and Moutain View by February
next year.
Naivas is the latest to announce fresh
expansion plans after Botswana retailer Choppies said it is investing
Sh754.7 million in Ukwala Supermarkets in which it acquired a 75 per
cent stake earlier this year.
The multinational says in
its latest trading update that it will invest the cash to open 12 more
stores in the local subsidiary over three years.
Naivas
says the takeover of Rihab Supermarket gives it a presence in Nakuru’s
central business district and raises the number of its branches to 39.
“The
Nakuru market has been growing consistently over time and there has
been overwhelming demand to have presence in the town centre,” Willy
Kimani, the chief commercial officer at Naivas said in a statement.
“We believe that the store will be a great success and eventually at maturity contribute three per cent of total revenue.”
Naivas
has an existing store along Nakuru’s Nairobi Road which is outside the
town’s CBD, with the acquisition of Rihab giving it a strategic presence
in the town centre on Oginga Odinga Street.
Naivas’
expansion comes at a time when several other supermarkets are reporting
losses and mounting debt distress, signalling turbulence in the formal
retail sector.
Retailers
have come under pressure from high operating costs, mounting supplier
dues, and margin pressures that have pushed two firms to the red.
“The
retail market has seen great challenges more so within the last two
years but all is being done to ensure consistency and that expansion is
well within limit not to strain operating capital,” Mr Kimani said.
Troubled
Uchumi had to battle a winding up suit early this year, triggered by
mounting suppliers’ dues amounting to Sh3.6 billion.
The
Nairobi proselytised retailer reported an after-tax loss of Sh3.4
billion in the year to June 2015 following a decline in revenue coupled
with impairments for “cooked books.”
Choppiesowned
Ukwala Supermarkets has also reported a net loss of Sh270.1 million in
the year to June, the first time investors are getting a peek into the
tier II retailer’s financials.
“Our operations in
(Kenya) will remain loss making in full year 2017 as we continue to
build our store base and invest in operational infrastructures,” the
multinational said in a trading update.
Choppies last year acquired a 75 per cent stake in family-owned Ukwala for Sh1 billion.
Nakumatt,
Kenya’s biggest retailer, has also admitted challenges settling
supplier dues. Suppliers reckon that the credit period at Nakumatt is
now between 180 and 270 days, up from the average 90 days.
The
retailer says it will sell a 25 per cent stake to an investor to raise
funds to stabilise its operations including retirement of part of its
Sh15 billion debt.
The headache of delayed payments has
forced the Treasury to draft rules that would see companies which
default in paying suppliers face interest on overdue amounts.
The
newly enacted Public Procurement and Asset Disposal Act (2015) provides
that entities which delay payments to suppliers shall incur additional
charges for each day past the due date
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