KENYA – The retail chain recently announced plans to close its loss-making Uganda and Tanzania branches.
The retailer says the outlets are bleeding cash and have fallen behind on supplier payments, relying mainly on the Kenyan business for support.
The regional subsidiaries cost the retailer Sh2.4 billion in cash injection every year but returned losses for the past five years, leading to their closure.
“Uchumi requires working capital and that is what we are looking at now. We are hoping that in the next one year all the stores will be fully stocked and would have recovered enough to re-enter the exited markets as well as other new markets,” Uchumi CEO Julius Kipng’etich said on Friday.
The retail chain said the two countries constituted 4.75 per cent of its entire business but accounted for a quarter of its operating costs, ratios which did not justify the high cash injection which was “straining its liquidity”.
Uchumi has also announced a sale-and-leaseback plan for two of its properties along Ngong and Lang’ata roads. The chain is banking on the sales to strengthen its liquidity and pay off its debts.
“Everything that bleeds must be closed. Just like a doctor, when a patient arrives at the hospital with a bleeding wound he will have to cover it with a bandage,” said the Uchumi boss.
Mr Kipng’etich was speaking during the Insurance Institute of Kenya’s (IIK) 30th annual conference in Nairobi. He said that the re-opened stores will be strategically located to maximise on their performance.
The retailer also has plans to set up an online sales unit to boost its turnover.
“We will ensure that Uchumi stores are in the right places – the Maua store, for instance, was in a market that was too rural for a big chain store,” said the CEO.