Uchumi Supermarkets' #ticker:UCHM chief executive Julius Kipng’etich’s sudden departure has called into question the retailer’s recovery prospects in an environment where deep-pocketed foreign rivals are racing to take more territory from struggling local rivals.
Dr Kipng’etich, whose resignation took Uchumi’s board by surprise, joined the retailer in August 2015 in what was billed as a swift turnaround mission.
But the turnaround artist, who established a corporate culture at government agency Kenya Wildlife Service (KWS), soon found out that Uchumi’s troubles ran deep and with very few avenues for the journey to recovery.
Uchumi’s problems appeared to have only compounded during Dr Kipng’etich two-year tenure and his exit now leaves the supermarket with the challenge of recruiting another turnaround artist.
“The … board of directors has accepted, with reluctance, the resignation of the chief executive officer of the company, Dr Julius Kipng’etich, with effect from November 30, 2017 to pursue personal interests,” the company announced on Wednesday.
Uchumi appointed chief finance officer Mohamed Ahmed as the acting CEO, promising to identify a substantive successor in due course. Chief operating officer Andrew Dixon –a former executive of Tesco and Nakumatt Holdings who joined Uchumi in November— is seen as a frontrunner to replace Dr Kipng’etich.
Uchumi chairperson Catherine Ngahu told the Business Daily that no decision had been made, but the new CEO would be recruited through a transparent process.
The retailer, which has in recent months faced a severe liquidity crisis, is meanwhile deploying the Sh700 million loan it received from the government last week to bolster its operations ahead of the critical Christmas shopping season.
Uchumi says it planned to restock its stores and engage with suppliers to maintain their support as it works on a long-term funding solution including selling assets and raising billions of shillings from a strategic investor.
The government has the option of converting the loan into shares or being repaid in cash after eight years. The new CEO will need robust and quick support of shareholders to accomplish what Dr Kipng’etich could not pull off.
Dr Kipng’etich leaves behind a smaller Uchumi that owes its existence to the government, a 14.7 per cent shareholder that has been the source of life support for several ailing firms including Kenya Airways and Mumias Sugar Company #ticker:MSC.
Uchumi’s net worth turned to a negative Sh2 billion in the year ended June 2016 and worsened to Sh3.3 billion in the subsequent year, the result of asset depletion, mounting liabilities and losses brought by sales declines.
The retailer’s net loss over the same period narrowed from Sh2.8 billion to Sh1.6 billion. Net sales, standing at Sh2.5 billion in the year ended June, are less than a fifth of the Sh14.4 billion recorded three years earlier.