Nakumatt closes Ronald Ngala branch after years of low sales volumes

Money Markets Nakumatt Supermarkets managing director Atul Shah. PHOTO | SALATON NJAU 

By GERALD ANDAE

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Summary

• The branch had been struggling over the years with low sale volumes, becoming unsustainable to maintain owing to high cost of operations.
• The closure of the Ronald Ngala branch now brings down to 63 the number of outlets that the retailer has in the region.
• Last December, Nakumatt opened a branch on Mombasa Road, which was followed shortly by another in Kigali, Rwanda.

Nakumatt Supermarket has closed its Ronald Ngala Street branch in Nairobi, citing low sales from the downtown shop.

Nakumatt managing director Atul Shah said the branch, which was closed a week ago, had been struggling over the years with low sale volumes, becoming unsustainable to maintain owing to high cost of operations.

Mr Shah said the affected employees would be absorbed in other outlets. 

“We have closed the Ronald Ngala branch completely because it has not been making enough sales to make it sustainable,” Mr Shah told the Business Daily on phone on Monday.

“Nakumatt is sometimes perceived as an expensive supermarket and its location was therefore not good for our business leading to its closure,” he added. 

The closure of the Ronald Ngala branch now brings down to 63 the number of outlets that the retailer has in the region.

Last December, Nakumatt opened a branch on Mombasa Road, which was followed shortly by another in Kigali, Rwanda.

The Mombasa Road outlet targets customers using the Southern Bypass, and the middle class residents of neighbouring residential estates like South B and C, Diamond Park among others.

The retailer has been facing financial challenges recently, and is currently working on a $75 million (Sh7.5 billion) deal to sell a 25 per cent stake to a strategic investor to retire its heavy debt burden. The reported transaction values the business at about Sh30 billion.

According to South African rating agency GCR, the retail chain’s gross debt more than tripled in as many years to Sh15 billion in the period to February 2015 from Sh4.2 billion in 2011, exerting pressure on operations and resulting in delay of payments to suppliers.

The supermarket chain earlier said the ongoing cash crunch had seen some overdue amounts “rescheduled arising from mutual engagements with various suppliers who appreciate the prevailing challenges,” highlighting the depth of the challenge.

Nakumatt, Tuskys and Naivas jointly owed suppliers Sh8 billion in unpaid dues in September last year. Some of the payments date back to early 2014.

The tough operating environment has pushed several supermarkets into losses including Uchumi and Ukwala, which was acquired by Botswana’s Choppies.

Competition has also increased with the entry and expansion of foreign retailers such as French chain Carrefour and South Africa’s Massmart Holdings-- which trades locally under the Game brand.