Nakumatt adopts accelerated cost cutting strategy as restructuring process gets into high gear

08/05…Regional retailer Nakumatt Holdings has entered into an accelerated business restructuring phase to streamline its operations.


The accelerated restructuring phase will see the retailer actively manage and reduce its total cost base by up to Kshs 1.5billion annually, guided by a recently developed operating strategy.


According to Nakumatt Holdings Managing Director, Atul Shah, the new operating strategy has been developed to provide a recovery platform for the firm and replaces the Nakumatt 2.0 strategy.


The Nakumatt 2.0 strategy had been developed in 2010 amidst an optimistic economic climate with the domestic economy (KENYA) enjoying a 5.6% growth rate and a 4.1% inflation rate. All indicators then, had pointed to a 10% growth rate by 2016 with the growth rates and inflation now at 5.8% and 6.3% respectively, according to the recently released Economic Survey 2017.


Alongside management enhancement programmes and specific cost cutting interventions, the new strategy, Shah said, will see the firm reducing its store keeping unit (SKU) exposure by retaining frequently purchased items and delisting slow moving products.


The firm, he added will also effect a strategic branch culling exercise targeting several of its poorly performing branches in Kenya and Uganda as part of the cost cutting strategy. The branch culling exercise, Shah explained will also involve the opening of new branches at carefully selected high traffic locations.


“The branch culling strategy will start off with sub optimally performing branches for whose leases contracts are due for renewal to be followed by branches in poor locations,” shah explained, adding that, “We have also embarked on a shelf stocks optimisation programme to enable us retain a lean variety of profitable retail products.”


As part of the strategy, Shah has confirmed that plans are underway to revert the struggling Nakumatt Haile Selassie branch located at KU Plaza, back to Kenyatta University, by the end of this month; at the expiry of the current lease.


The closure of Nakumatt Haile Selassie will be the third closure to be undertaken by the retailer in recent months following similar developments at its former Nakumatt Ronald Ngala and Nakumatt Katwe in Nairobi CBD and Kampala, Uganda respectively.


The firm, Shah added has also adopted a group wide freeze on new staff signings, opting to absorb and progressively deploy staff from recently closed branches to its existing and upcoming outlets.


All the employees previously assigned to work at Nakumatt Ronald Ngala have already been absorbed at other Nairobi branches. Staff members currently serving at Nakumatt Haile Selassie, will be absorbed at other Nakumat branches ahead of their re-deployment to upcoming branches including, Nakumatt Embakasi at the new Southfield Mall.


Last March 2017, the firm announced the opening of Nakumatt Oyster Bay; its fifth branch in Dar es salaam, Tanzania. The opening of Nakumatt Oyster Bay, Shah said is part of the retailer’s efforts to enhance its Dar-es-salaam footprint while boosting its top line growth.


Nakumatt opened its first Tanzania store in Moshi, at the foot of Mount Kilimanjaro in 2011 and has successfully managed to extend its footprint in Arusha and Dar es salaam.


As part of the ongoing corporate restructuring plan, Nakumatt Holdings recently announced the first phase completion of a Warehouse Management System (WMS) integration project, at its Nairobi logistics hub.


The successful completion of the project, featuring one of the most advanced WMS systems in sub-Sahara Africa, has seen Nakumatt Holdings, deploying an automated warehousing solution, to boost its supply chain efficiencies, across East Africa.


Nakumatt Holdings recently enjoyed the consulting services of Outram Cullinan & Company (OC&C) Strategy consultant-one of the world’s most respected retail services corporate strategists. Founded in 1987, OC&C Strategy Consultants has curved a niche in the global retail sector as a strategy consulting firm that brings clear thinking to the most complex issues facing today’s management teams.


Alongside OC&C, Nakumatt, has also retained Information Technology Consulting firm, Zensar, to spearhead its IT re-engineering process.