Retailers in the Kenyan market are facing strong headwinds related to high operating costs, mounting supplier dues, and margin pressures that have pushed two retailers to the red.
The current suppliers’ disquiet at Nakumatt and loss-making position of Uchumi and Ukwala reveal a retail industry in turmoil.
Troubled Uchumi had to battle a winding-up suit early this year, triggered by mounting suppliers’ dues amounting to Sh3.6 billion.
The Nairobi bourse-listed retailer reported an after-tax loss of Sh3.4 billion in the year to June 2015 following a decline in revenue coupled with impairments for “cooked books.”
Choppies-owned Ukwala Supermarkets has also reported a net loss of Sh270.1 million in the year to June, the first time investors are getting a peek into the tier II retailer’s financials.
Choppies last year acquired a 75 per cent stake in family-owned Ukwala for Sh1 billion.
Nakumatt, Kenya’s biggest retailer, has also admitted challenges settling supplier dues. Suppliers reckon that the credit period at Nakumatt is now between 180 and 270 days, up from the average 90 days.
The headache of delayed payments has forced the Treasury to draft rules that would see companies which default in paying suppliers face interest on overdue amounts.
The newly enacted Public Procurement and Asset Disposal Act (2015) provides that entities which delay payments to suppliers shall incur additional charges for each day past the due date.