Nakumatt feels the blues, engages financiers to capitalize business

Retail chain Nakumatt Holdings has sounded a distress alarm indicating financial strain, bogged down by an unfavorable business environment.

Without going into detail, the three decade old retailer has indicated operational challenges had led to cash flow constraints in the face of rising operating costs rise.

This has led to re negotiations with a section of suppliers, as Nakumatt moves to ensure it has adequate stocks for its 65 branches spread across the region.

The challenge appears to stem from an outdated supply chain system that has meant the retailer has not been working with the optimal amount of goods to service its operations.

Nakumatt Holdings Chief Executive Officer Atul Shah on Thursday said the company is auditing its warehouse management system to ensure the retailer is able to hold the required stocks based on individual branch demand.

“Such a system allows us to streamline supplier payment systems by ordering stocks based on actual consumption trends while reducing shrinkage,” Mr Shah said in a statement.

Nakumatt customers have over the past two months raised concern of missing items from the retailers’ shelves, fueling speculation of financial distress.

According to the company, the firm also has an accumulation of bank loans and related debts that are putting stretching its finances.

Mr Shah confirmed that negotiations with both local and international financiers were underway to recapitalize the business.

“With ongoing financial re-engineering engagements focused on accessing significant capital injection, we are confident that the overall debt will further reduce once the process is concluded in coming days,” he stressed without giving details on the outstanding debt.

Nakumatt is expected to unveil the strategic investors within the next two weeks.

The family run business has been one of the country’s better performing retailers, stocking its shelves with an array of international brands.

Nakumatt has also been on an aggressive expansion drive that has seen it set up operations in Rwanda, Uganda and Burundi as well as branch expansion in Kenya.

The expansion binge is seen to have stretched the retailer’s logistics chain, culminating in years of increased operational costs.

Mr Shah said the company would be engaging its suppliers, keeping them updated on developments to avoid a stock out.

Nakumatt is said to be seeking new supply contracts that will also ease cash flow.

Nakumatt’s distress call comes at a time the country’s oldest retailer Uchumi Supermarkets is waiting on much needed capital injection to get back to profitability.

The listed firm has indicated it requires up to Sh5 billion shillings to get back to operational efficiency.