Uchumi on the rocks again as auctioneers raid branches

Casual Workers hired by an auctioneer remove structures from Uchumi Supermaket at Mombasa's Moi Avenue. [Maarufu Mohamed/Standard]

Uchumi Supermarkets may be running out of its nine lives as branch closures over rental disputes eat up its remaining barely functional branches.

Last week, Uchumi’s Koinange branch was shut down after auctioneers allegedly carted away stock.

“Last Thursday, auctioneers came here in lorries and took everything and left,” a guard at an adjacent building told The Standard. The branch is now shut.

In April, Makini Auctioneers raided the Uchumi branch along Moi Avenuein Mombasa and made away goods against a claim of Sh12 million in rent arrears.

In Kisumu, Pambo Auctioneers tried to attach the supermarket’s premises at West End Mall over rent arrears. The management agreed to a truce with the landlord.

The retailer has lost 24 branches after it exited prime space at Sarit Centre and several more might be shut because of rental disputes and lack of stock. Several other branches have been closed.

“As Uchumi works towards ensuring that it continues to optimise its space in the current 12 outlets, some of the branches remain closed as negotiations with landlords continue. Uchumi is working to ensure these negotiations are fast-tracked to ensure branches are reopened,” said Uchumi CEO Mohamed Mohamed.

The listed retailer that has survived several downturns, including being placed in receivership and facing liquidation, seems to have run out of steam. The last-ditch efforts to save the retailer make it seem as if the only thing it can sell is the brand.

The supermarket is selling its lucrative Lang’ata Hyper branch as a franchise to an external firm.

“Uchumi is still considering various financing options for the recovery of the supermarket. One of the models being explored is franchising, which will leverage on the Uchumi brand to bring in royalty revenue,” Mr Mohamed said.

Turnaround acumen

The revival of the retailer was hinged on a strategic investor pumping in money to buy brand equity while offsetting huge debts with the sale of assets, but the chances of this happening seem to dim by the day.

The retailer first went under in 2006 on Madaraka Day. It was subsequently delisted from the Nairobi Securities Exchange, but got back into the bourse five years under receiver manager Jonathan Ciano.

In 2016, Uchumi was back on the rocks after suppliers quit over unpaid stock, sending the retailer back into a tailspin.

The retailer turned to Julius Kipng’etich, former Equity Bank Ltd chief operating officer and previous Kenya Wildlife Service director known for his turnaround acumen. However, his efforts to revive the ailing retailer were frustrated by debts, hostile suppliers, and a tough operating environment.

Uchumi then recruited Mohamed, formerly the chief finance officer, to head the recovery plan which has since degenerated into letting the business run more as a landlord with a historic brand.

The retailer had also attempted to convert part of the supplier debt to equity, akin to the miracle that saved it after its first collapse, but the strategy failed to pan out.