Nipate
Forum => Kenya Discussion => Topic started by: gout on June 20, 2017, 09:24:30 AM
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A supermarket model where one pays for goods after 60-90 days should never have a cash flow problem whatsoever given we line up to pay in cash for the same goods.
Uchumi/Ukwala/Naivas/Nakumatt scenarios
The owners and their families do serious cash stripping.
The managers also go in an unhinged theft and book cooking spree. They also inflate supplies orders. As things head south the managers become air suppliers and pay themselves before genuine suppliers. In Nakumatt the owners and managers introduced the 'Blue Label' to cut out manaufacturers mark up.
The supervisors, cashiers and shelf guys follow suit. Shopping worth 10,000 is charged at 2,000 and give the staff a 1,000 or 2,000 as per agreement. Electronics, carpets, furniture are a goldmine.
The transport guys, warehouse guys all find ways to pilfer given no one has the moral authority.
Not a way to run any business for long. The cancer will catch up with you given you ain't a government which has taxes to rely on. Even drug monies run out.
Such a tragic turn of events for Nakumatt which I had thought would edge out EABL for honours with Safaricom as a Kenyan brand which would go regional.
The supermarket, which runs the highest number of outlets in East Africa, had by Monday not paid 1,555 employees their May salaries but had more than 100 on compulsory leave, citing low business volumes.
The retailer, which has 5,700 employees in Kenya, said a delay in completing the restructuring of its business — which involves attracting fresh capital — has seen it fail to honour this monthly liability on time, leaving its staff in financial distress.
http://nairobinews.nation.co.ke/news/nakumatt-woes-deepen-workers-salaries-delayed/
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Doesn't make sense. Unless you mean staff suddenly took stealing to a new level.I think reckless expansion financed by debt (not injection of new capital) is probably to blame - including buying out woolworth, shoprite (UG/TZ), yakomatt and others. Also Mwau exit means they cannot expand without injection of new capital. They can crawl out of this because Nakumatt is well regarded brand..the Shahs need to just injection of new capital to pay off debt and cease expanding crazy.
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The expansion has been financed through debts over the years. Unless the loans were also redirected like the cases of Chase and Imperial Bank.
The rating agency noted that Nakumatt’s debt burden had quadrupled in the last four years to Sh18 billion up from Sh4.7 billion in 2012 “placing unduly high pressure on the group’s gearing and liquidity position, with funding limits having largely been reached.”
http://www.businessdailyafrica.com/corporate/Nakumatt-takes-Sh500m-loan-ahead-of-share-sale/539550-3505944-format-xhtml-d9lxae/index.html
Customers have been lining up wherever Nakumatt appears
Nakumatt’s gross sales grew by nearly a tenth to Sh51.6 billion in the year ended February 2015 compared to Sh48 billion a year earlier.
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The expansion and high priced leases in vacant malls is partly to blame. Garden city,Ridgeways and prestige mall are doing badly . In addition they came up their own brands that are priced lower than manufacturers brands. So the manufacturers insisted that they be paid upfront, a different business model from the 90days payment model they are used to. That has affected their cash flow.
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They also need to shed the tag that they're expensive.It's not sustainable to expand if they are targetting upper-middle class. Tuskys & Naivas are eating their lunch because they are everywhere..in middle class areas and down to the slums.
The expansion and high priced leases in vacant malls is partly to blame. Garden city,Ridgeways and prestige mall are doing badly . In addition they came up their own brands that are priced lower than manufacturers brands. So the manufacturers insisted that they be paid upfront, a different business model from the 90days payment model they are used to. That has affected their cash flow.
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Nakumatt need to rethink strategy. They are sandwiched between the Carrefours and Naivas/Tuskys. Like Barclays. They need to find a niche instead of appealing to everyone. That is the main culprit - fresh loans, capital, layoffs, etc is putting the cart before the horse.
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The old man/fool needs to be flexible.
A source said Nakumatt has so far received more than 10 offers from international private equity firms who are ready to inject more cash.
However, most of these firms are only willing to do so on the condition that the Shah family cedes control of the business.
“All negotiations have ended at that stage. The old man (Atul) cannot bear to lose control of the company.”
http://www.nation.co.ke/news/Why-Nakumatt-is-on-its-knees-/1056-3986128-157dhxe/index.html
The government also must not be aloof like the old fool. 5,000 employees. suppliers, tax, Kenyan defining brand means something.
“We have no stake in Nakumatt and we are not bailing them out. We also have to consider the moral hazard where we will be encouraging private firms to come to the Government for help,” Mr Kiptoo told The Standard.
https://www.standardmedia.co.ke/business/article/2001244901/forget-about-any-bailout-state-tells-ailing-nakumatt
Or else our tenderpreneur sharks can invest here and push the old man out. It is a heck profitable venture.