Tuskys bounce back uncertain – analysts

 

Tuskys supermarket's ability  to bounce back is unpredictable,  according to investment firm Cytonn.

The retailer is currently in the second week of negotiations with its creditors.

The unpredictability is pegged on the retailer's failure to stabilise its operation even after receiving Sh500 million in September.

This was the first tranche of the Sh2 billion capital injection from an undisclosed Mauritius-based fund.

Chief Executive Dan Githua had said the funds would go towards immediate working capital requirements including partial settlements to staff, suppliers and landlords among others.

“Having received the funds, we are actively releasing due payments to landlords, staff, and suppliers. In particular, the first tranche of the suppliers' old debt amounting to Sh321 million has been settled,” Githua said then.

The retailer however remains in financial troubles with its creditors seeking payments.

Last week, it shut down Tuskys Magic branch in Nakuru Town, Tuskys Pioneer on Moi Avenue, Nairobi, Adams Arcade branch on Ngong Road and the Kitengela branch.

“In our view the retailer’s ability to bounce back is unpredictable having failed to stabilise its operation even after allegedly receiving Sh500 million in September 2020 to pay off landlords, suppliers, and facilitate other immediate working capital requirements,”analysts at Cytonn say their   weekly report.

The retailer was last week hit by a series of cash losses after senior staff opted to 'pay themselves' using daily sales proceeds and inventory, with unpaid salaries remaining a concern across its branches.

Tuskys management last week commenced a series of meetings with key suppliers and creditors as part of its business revival plan.

It met fast-moving consumer goods (FMCG) suppliers last Wednesday before holding talks with fresh produce and general merchandise suppliers on Saturday.

Today (November 10), management will be meeting suppliers of its Mavazi clothing line.

It plans to have talks with its electronic suppliers and labour union representatives, and labour outsourcing, on Thursday.

Management will also be meeting space-letting partners to sort out rent issues, in one-on-one meetings to be mutually agreed upon,according to a communique by the retailer.

This is after the High Court asked the retailer to engage its creditors on plans to settle its outstanding debts.

On October 21, Justice Francis Tuiyot, sitting at the commercial division of the High Court, Nairobi, issued orders of stay against attachment, sequestration, distress, or execution against the property of Tusker Mattresses Limited.

On October 27, the orders were extended to November 17, with the court directing that Tuskys engages its creditors.

Chairman Bernard Kahianyu said the creditor meetings would provide an engagement platform to update all stakeholders on the business recovery plan, with management remaining optimistic of a strong come-back.

According to Cytonn: "Only a significant infusion of significant equity capital by a strategic or financial investor can save the brand right now.”

The struggling retailer has paid a total Sh6.1 billion in supplier debt in the last four months, an update by the Competition Authority of Kenya shows.

It paid Sh796.5 million to suppliers in the month of September, Sh814 million in August, Sh1.82 billion in July and Sh2.77 billion in June.

This is a major stride towards clearing its supplier debt which stood at about Sh6.2 billion in August, with the figures changing based on new supplies.