Uchumi Supermarkets expects profits to fall by more than a quarter

NAIROBI: Uchumi Supermarkets has issued a profit warning for the year ended June with the struggling retailer projecting a 25 per cent drop in earnings. The retailer booked a net profit of Sh536 million last year, a figure that has been contested by some directors as having been padded by past management including its fired chief executive Jonathan Ciano.

“The Board of Uchumi Supermarkets Limited currently forecasts that earnings for the financial year ending June 2015 will be lower than those recorded in 2014 by at least 25 per cent,” indicated the firm in its regulatory filings yesterday.

Uchumi’s warning comes on the back of a series of similar notices by several listed firms, which tells of a difficult business trading environment during the review period.

Company chairperson Khadija Mire, said in the statement that both Tanzania and Uganda presented a challenge in the past year, while working capital constraints had depressed the operations. Already, the retailer has announced plans to scale back on operations in the two countries, including possible exits.

The profit warning issued could suggest that the retailer may report a loss for the year. Uchumi is likely to announce its results soon. Last year, the firm reported the results in the first week of September. The notice comes only days after the firm recruited Julius Kipng’etich from Equity Bank to lead in its turnaround.

Other appointments to key positions are expected within a "few weeks", according to the chair of the board. Ms Mire expressed confidence that the new management would deliver enhanced growth.

“A comprehensive revamp of governance as well as processes has started and we have already seen a change in our stores with increased customer footfall and revenues,” she said. Deloitte has been contracted to help restructure the business that once commanded the largest share of the market.

Cash flow problems have strained the working relationship with suppliers, with some stopping deliveries.