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Uchumi’s painful road to recovery as low sales and debt hurt earnings

By Otiato Guguyu | March 1st 2017
Uchumi C.E.O Julius Kipngetich taken on 14th July 2016. PHOTO:WILBERFORCE OKWIRI

Uchumi Supermarket received just a quarter of proceeds from the sale of Ngong Road Hyper after Kenya Commercial Bank took the rest to settle the retailer’s debt.

According to the company’s latest financials, it received Sh342 million for the prime property in Nairobi, which was sold for an estimated Sh1.4 billion.

“The board of management continues to pursue strategies aimed at stabilising the company’s performance, including the sale of non-core assets,” Uchumi said in a statement yesterday.

Last year, Uchumi’s boss, Julius Kipng’etich, admitted that KCB, cautious of the winding-up petition, withheld proceeds of the sale at a time when the retailer was almost running on empty shelves and badly needed the cash.

Change strategy

Dr Kipng’etich said the retailer’s board has since been forced to change strategy as a result, and decided to let KCB keep the proceeds to reduce the firm’s finance costs.

He noted that the proceeds from the sale of Ngong Road Hyper helped reduce the debt owed to financiers from Sh2.5 billion to Sh1.1 billion.

The company yesterday reported reduced losses, even though sales dipped by more than half. Uchumi reported Sh547 million in losses after taxes for the six months to December 2016, an improvement from two years ago when losses hit Sh1 billion.

During the period under review, Uchumi bought stock worth Sh1.1 billion, down from Sh3.3 billion in 2015, which resulted in net sales of Sh1.3 billion as opposed to Sh4.2 billion.

“The sales were significantly impacted by lack of optimal stock levels due to delays in funding,” Uchumi said.

The retailer’s half-year results were heavily affected by a winding up petition filed by some of its suppliers who were seeking to liquidate it.

During the period, some of its suppliers withdrew their products from its shelves, denting customer footfall on unreliable stock.

The listed retailer has, however, managed to convince the suppliers to take up a debt-to-equity conversion deal, as well as sell stock through an escrow account to allow for prompt payments.

Uchumi Supermarkets made a Sh2.8 billion loss in the year to June last year, which was also an improvement from Sh3.4 billion reported the previous financial year.

The retailer’s board and management are confident that Uchumi will move out of the red next year if the current upward trend continues.

The firm had drawn up a two-and-a-half year turnaround plan as it sought to stabilise the business through stringent financial management, closure of non-viable outlets, opening stores in the right locations, rationalisation and competency assessment of staff, refurbishment of key branches to increase footfall, enriching supplier relationships and transforming customer service delivery.


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