Breaking News

Nakumatt eyes Sh1.5bn savings with branch closure strategy

Monday May 8 2017

Nakumatt Managing Director Atul Shah. FILE PHOTO | NMG

Nakumatt Managing Director Atul Shah. FILE PHOTO | NMG 

By BRIAN NGUGI
More by this Author
By MUGAMBI MUTEGI
More by this Author

Nakumatt Supermarkets has announced plans to close its poorly performing branches in Kenya and Uganda as part of cost-cutting measures aimed at saving the retailer Sh1.5 billion annually.

The first store to be shut down is the Haile Selassie Branch located at the Kenyatta University Plaza, Nairobi which is set to be closed this month and handed back to the university, which is the landlord.

The chain did not, however, disclose the total number of branches that will cease operations under the move.

Mr Atul Shah, Nakumatt managing director, says the business has also frozen recruitment of new staff.

“The branch culling strategy will start off with sub-optimally performing branches for whose leases contracts are due for renewal to be followed by branches in poor locations,” he said in a statement.

“All the employees previously assigned to work at Nakumatt Ronald Ngala have already been absorbed at other Nairobi branches.”

In February, the retail chain closed its Ronald Ngala branch citing low sales.

Last month, the retailer shut down a branch in Uganda that had accumulated rent arrears estimated at about Sh8.5 million.

The closure of its Haile Selassie outlet brings Nakumatt’s branches to 62 and marks a new chapter in the life of the retail chain that is struggling with a mountain of debt and unpaid suppliers.

Nakumatt has announced that it has started reducing its store keeping unit (SKU) exposure by delisting slow-moving products.

Already, the retail chain has cut the types of juices it sells from 26 to eight while it now only offers three types of water brands – Keringet, Dasani and Blue Label – down from 12.

“We have embarked on a shelf stocks optimisation programme to enable us retain a lean variety of profitable retail products,” said Mr Shah.

The retailer has also decided to shut down one of its two warehouses (where it stores imported goods as well as furniture and electronics) along Mombasa Road as part of the consolidation.

Nakumatt is banking on cash injection from a new strategic investor to address frequent stock outs at its outlets.

The retailer is battling to cut back on huge debt owed to suppliers estimated at Sh15 billion as at February 2015, a situation that has been piling pressure on its operations.