Tweet
Super Plus cash crunch - Eight outlets closed, headquarters sold, three stores on market
Published: Saturday | March 14, 2009
File
An empty shelf in the Super Plus supermarket in Portmore Pines, St Catherine, this week. There has been a visible drop in the number of customers at the store. However, it has not been identified by CEO Wayne Chen as one of the stores to be closed in the Super Plus Group's restructuring exercise.
Dionne Rose, Business Reporter
Faced with supply creditors taking a hard line, soaring costs, collapsing sales and plummeting profits from its once diversified food distribution business, Super Plus Food Stores has shuttered up to eight of its supermarkets and wholesales, sent 600 workers packing, sold its St Andrew headquarters for $88 million, and is now hunting more cash, putting up three of its food stores for sale.
Acknowledging the cash crunch facing the privately owned family business, Super Plus Chairman and Chief Executive Officer Wayne Chen told the Financial Gleaner that 2008 annual gross turnover was flat at $11 billion up to the end of the financial year two months ago, the same performance the company turned in the previous year. He confirmed that three outlets in the now 26-strong supermarkets and wholesale chain have been put up for sale in a bid to raise needed cash.
"We are selling to raise cash because right now we believe that we have to put more cash into the business and we have put a considerable amount of cash in over the last two years," Chen said this week. "And we are putting more assets into the business to strengthen the balance sheet and to really just raise cash because, over the time, credit supplies have gone down considerably and bank credits have not increased."
Chen declined to reveal which locations were up for sale, saying he did not want to create anxiety among workers, whose fate would be determined by any new owners. He would also not disclose the total amount of money needed to ease the company's cash flow woes.
In the meantime, the company has sold its head office property on Beverly Vale Close in St Andrew and will be relocating the offices to its Cross Roads branch in Kingston, where the existing supermarket space its being significantly scaled down. A reliable source told the Financial Gleaner that Super Plus, owned by Chen, his siblings and his ex-wife, Ann, had fetched US$1 million ($88 million) for the one-acre property with 5,500 square feet of floor space.
The aggressive sell-off of company assets is being viewed by the Super Plus owners as the only practical route to maintaining viability in a weak economy. Chen said plans to list the business on the Jamaica Stock Exchange are now on hold indefinitely.
"The market is severely depressed. There is no real value in going on the Stock Exchange right now."
Sluggish sales
And amid still spiralling interest rates, Chen's assertions at the start of the company-wide restructuring in 2006, that cash flow needs would be met by bank borrowing, now seem to be out the window.
Chen said this week that while the number of supermarkets were being contracted in the face of sluggish sales, declining margins and a generally tight economic situation, the company's non-core pharmacy and cambio businesses were being expanded. In an effort to cash in on the larger gains from currency trading, Super Plus has upped its number of cambios to 14 from nine over the last two years. The number of pharmacies are also on the rise with more to come on stream later this year, Chen said.
"We have been going through a restructuring for the last two years, we have been shrinking the number of stores, expanding the different businesses we are in and generally reorganising the business," said the Super Plus CEO.
The restructuring has seen the supermarket and wholesale chain chopping its outlets from 33 to 26, 20 of which are controlled by Chen and his brother, Richard, and six by his other sibling, Charles.
"Some lines of business were scaled back because, within the group of stores, there were wholesales, supermarkets and home stores. We decided to close the wholesales in Savanna-la-Mar and Whitehouse in Westmoreland, in May Pen (Clarendon), Christiana (Manchester) and Spalding (Clarendon). We got out of the wholesale business because the margins were too low (about eight per cent) and the risk was too high," said Chen. The wholesale side of the Mandeville location has also been shuttered.
Meanwhile, Chen said two supermarkets - in Oasis Plaza, Spanish Town and Overton Plaza in Montego Bay - that were loss-making or marginal were closed.
The Super Plus restructuring has seen staff complement moving from 2,300 to 1,700.
Business downturn
According to Chen, like many other businesses, Super Plus has been feeling the pinch from business downturn brought on by the contagion from the global economic crunch. Operations in central Jamaica, he pointed out, have been hit most severely as a result of the slow down in the bauxite sector, which has seen significant job cuts.
"Customers are more careful. The folding back of the bauxite industry has affected customers' spending power and we are feeling the effect, (but) we are getting fit and ready for the long haul," said Chen.
The chain of supermarkets was started in 1963 by Charles Chen, when he opened a small grocery shop in Portland. Years later, his grandchildren grew the business by opening stores across several parishes.
Published: Saturday | March 14, 2009
File
An empty shelf in the Super Plus supermarket in Portmore Pines, St Catherine, this week. There has been a visible drop in the number of customers at the store. However, it has not been identified by CEO Wayne Chen as one of the stores to be closed in the Super Plus Group's restructuring exercise.
Dionne Rose, Business Reporter
Faced with supply creditors taking a hard line, soaring costs, collapsing sales and plummeting profits from its once diversified food distribution business, Super Plus Food Stores has shuttered up to eight of its supermarkets and wholesales, sent 600 workers packing, sold its St Andrew headquarters for $88 million, and is now hunting more cash, putting up three of its food stores for sale.
Acknowledging the cash crunch facing the privately owned family business, Super Plus Chairman and Chief Executive Officer Wayne Chen told the Financial Gleaner that 2008 annual gross turnover was flat at $11 billion up to the end of the financial year two months ago, the same performance the company turned in the previous year. He confirmed that three outlets in the now 26-strong supermarkets and wholesale chain have been put up for sale in a bid to raise needed cash.
"We are selling to raise cash because right now we believe that we have to put more cash into the business and we have put a considerable amount of cash in over the last two years," Chen said this week. "And we are putting more assets into the business to strengthen the balance sheet and to really just raise cash because, over the time, credit supplies have gone down considerably and bank credits have not increased."
Chen declined to reveal which locations were up for sale, saying he did not want to create anxiety among workers, whose fate would be determined by any new owners. He would also not disclose the total amount of money needed to ease the company's cash flow woes.
In the meantime, the company has sold its head office property on Beverly Vale Close in St Andrew and will be relocating the offices to its Cross Roads branch in Kingston, where the existing supermarket space its being significantly scaled down. A reliable source told the Financial Gleaner that Super Plus, owned by Chen, his siblings and his ex-wife, Ann, had fetched US$1 million ($88 million) for the one-acre property with 5,500 square feet of floor space.
The aggressive sell-off of company assets is being viewed by the Super Plus owners as the only practical route to maintaining viability in a weak economy. Chen said plans to list the business on the Jamaica Stock Exchange are now on hold indefinitely.
"The market is severely depressed. There is no real value in going on the Stock Exchange right now."
Sluggish sales
And amid still spiralling interest rates, Chen's assertions at the start of the company-wide restructuring in 2006, that cash flow needs would be met by bank borrowing, now seem to be out the window.
Chen said this week that while the number of supermarkets were being contracted in the face of sluggish sales, declining margins and a generally tight economic situation, the company's non-core pharmacy and cambio businesses were being expanded. In an effort to cash in on the larger gains from currency trading, Super Plus has upped its number of cambios to 14 from nine over the last two years. The number of pharmacies are also on the rise with more to come on stream later this year, Chen said.
"We have been going through a restructuring for the last two years, we have been shrinking the number of stores, expanding the different businesses we are in and generally reorganising the business," said the Super Plus CEO.
The restructuring has seen the supermarket and wholesale chain chopping its outlets from 33 to 26, 20 of which are controlled by Chen and his brother, Richard, and six by his other sibling, Charles.
"Some lines of business were scaled back because, within the group of stores, there were wholesales, supermarkets and home stores. We decided to close the wholesales in Savanna-la-Mar and Whitehouse in Westmoreland, in May Pen (Clarendon), Christiana (Manchester) and Spalding (Clarendon). We got out of the wholesale business because the margins were too low (about eight per cent) and the risk was too high," said Chen. The wholesale side of the Mandeville location has also been shuttered.
Meanwhile, Chen said two supermarkets - in Oasis Plaza, Spanish Town and Overton Plaza in Montego Bay - that were loss-making or marginal were closed.
The Super Plus restructuring has seen staff complement moving from 2,300 to 1,700.
Business downturn
According to Chen, like many other businesses, Super Plus has been feeling the pinch from business downturn brought on by the contagion from the global economic crunch. Operations in central Jamaica, he pointed out, have been hit most severely as a result of the slow down in the bauxite sector, which has seen significant job cuts.
"Customers are more careful. The folding back of the bauxite industry has affected customers' spending power and we are feeling the effect, (but) we are getting fit and ready for the long haul," said Chen.
The chain of supermarkets was started in 1963 by Charles Chen, when he opened a small grocery shop in Portland. Years later, his grandchildren grew the business by opening stores across several parishes.
Comment