Uchumi board chairperson Catherine Ngahu speaks at a press briefing
after the retailer’s AGM at Ufungamano House in Nairobi March 29, 2018.
She is with acting chief executive, Mohamed Mohamed. PHOTO | SALATON
NJAU | NMG
Summary
- Retail chain says it used most of the Sh700 million it got from government in December to restock its stores
- It has sought the help of financial institutions to settle the salary arrears in the next two weeks as it awaits additional funds.
- Uchumi also made public its plan to create an online supermarket to widen its reach and offer convenience to customers.
Uchumi Supermarkets has used all the Sh700
million bailout cash it received from the government in December,
prompting it to seek the assistance of financial institutions to pay
staff.
The retail chain, which has not paid salaries
since December, on Thursday said it used the last tranche of the Sh1.8
billion bailout cash to restock its stores during the Christmas holidays
and to partly pay rent and a portion of staff wages.
The
Cabinet in 2016 approved a Sh1.8 billion bailout package for Uchumi,
Sh600 million more than what the retailer had asked for, to help settle
its Sh3.6 billion debt load.
It has emerged that Uchumi
is now back in a tight liquidity position that is slowing down its
recovery, even as it awaits the injection of additional cash from a
strategic buyer it has been courting in the past three years and about
Sh2.5 billion from the sale of its land in Nairobi’s Kasarani area.
Salary arrears
Mohamed
Mohamed, the retail chain’s acting chief executive, said Uchumi has
sought the help of financial institutions to settle the salary arrears
in the next two weeks as it awaits additional funds.
“We
are now looking into ways of clearing the backlog of the staff
salaries, and this should be sorted out in the next seven to 14 days.
"By
the end of the 14 days we should at least be able to regularise the
staff salaries,” Mr Mohamed said during a press briefing held after the
firm’s AGM.
Uchumi also denied reports that it was
facing auction over rent arrears owed to landlords but admitted that
there have been threats from some creditors.
Last week
auctioneers descended on Uchumi’s Kisumu branch demanding payment of
Sh14 million rent arrears, a matter Uchumi says it is working to
resolve.
The
retailer, however, denied reports that its head office is under threat
of auction by Kenya National Trading Corporation (KNTC).
Restocking plan
Uchumi
said its restocking plan will continue to focus on fast-moving consumer
goods until it secures funding to procure durable (hard) goods.
“What we are focusing on are key items (fast-moving consumer goods) that people need to replenish on a daily basis.
"Additional
ones will come in after the sale of land, or when the new investor
comes or when we have the possibility of debt financing,” said Mr
Mohamed.
Uchumi also made public its plan to create an online supermarket to widen its reach and offer convenience to customers.
The
retailer is said to be engaging other players in the sector to ensure a
smooth rollout of the online platform before the end of the third
quarter of the year.
“Recent reports show that one out
of four Kenyans shop online. We are now working on improving our
presence in the online space, to take advantage of it and adapt to the
changing market needs. We should unveil it as soon as we are ready,”
said Mr Mohamed.
“This is another strategy to cut costs because brick and mortar (physical premises) is expensive to run.”
“This is another strategy to cut costs because brick and mortar (physical premises) is expensive to run.”
Sh1.7bn loss
This
latest announcement comes in the wake of a Sh1.7 billion loss for
2016-17, a 39 per cent drop from the Sh2.8 billion recorded in the
previous year.
Mr Mohamed said that despite
cost-cutting measures taken so far, last year’s political activity
weighed heavily on the company’s performance.
Uchumi
has over the past two years shut down several non-performing branches as
increased competition from old and new rivals upended its earnings.
“Our
combination of turnaround strategies continues to slowly stabilise our
operations, and we are actively seeking to bring the company to a
positive and sustainable position,” he said.
“Before
making premature conclusions about the status of our turnaround
strategy, one has to take into account that Uchumi has not been immune
to broader economic pressures such as ongoing uncertainty surrounding
the local supermarket sector and prolonged electioneering period.”
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