Uchumi blames high operation costs for Sh262m half year loss

KENYA – Uchumi Supermarkets fell into the red in the six months to December 2014, blamed on high operational costs, increasing competition and falling sales.

The retail chain posted a half year loss of Sh262.3 million compared to a net profit of Sh106.9 million recorded during a similar period in 2013.

Uchumi Chief Executive Jonathan Ciano attributed the performance to increased rental costs, ballooning salary expenses and reduced customer spending as shoppers kept off malls due to insecurity.

“This is due to committed rental escalations and the impact of rent for newly opened branches that have yet to mature, coupled with higher staff costs,” Mr Ciano said in a trading update.

“The adverse effects of insecurity, among other reasons, contributed to dampening of the general propensity to spend.”

Uchumi’s sales declined to Sh6.8 billion from Sh7.2 billion in December 2013, a drop of 6.3 per cent.

Operating expenses shot up by a 10th to Sh1.7 billion from Sh1.6 billion the previous year. The company’s finance costs more than doubled to Sh60 million from Sh26 million a year earlier, as Uchumi services the loans it took from banks last year.

The financial results come after Uchumi raised Sh895.8 million through a rights issue last year, an offer that was oversubscribed by 83 per cent.

Mr Ciano said the retailer is banking on the funds raised through the cash call to boost cash flow, pay suppliers in time, refurbish its existing outlets and fund growth.

“This is already starting to impact positively by freeing cash flows for working capital and we have started normalising accounts with our suppliers,” the Uchumi boss said.

The listed retailer plans to grow its network by opening 10 more branches across the region, according to Mr Ciano.

“We have continued with cautious growth in our retail networks in the region in carefully selected strategic locations geared towards reaching our customers in areas that were previously unserved by Uchumi,” said the retailer.

Uchumi is ranked Kenya’s fourth largest supermarket chain by revenue, trailing Nakumatt, Tuskys and Naivas.

It opened two branches in Dar-es-Salaam during the half year period, bringing its total network in Tanzania to five. It currently has 37 stores across East Africa.

February 23, 2015; http://www.nation.co.ke/business/Uchumi-blames-high-operation-costs-for-Sh262m-half-year-loss/-/996/2632194/-/ycv21iz/-/index.html

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