The High Court has temporarily stopped Tuskys Supermarkets from declaring 38 of its staff redundant resulting from last month’s closure of Express branch along Nairobi’s Sheikh Karume Road.
Lady Justice Linnet Ndolo issued the order on Monday following an application by the Kenya Union of Commercial Food and Workers Union (Kucfaw), acting on behalf of the affected employees.
The union is seeking to have the redundancy declared “null and void” and “stopped altogether” as well as have Tuskys pay for the litigation costs of the court case.
“It is hereby ordered that a temporary order be and is hereby granted restraining the respondent from proceeding with redundancy pending inter-partes hearing of this application on March 22, 2017 before any judge,” said Justice Ndolo.
Tuskys, the country’s second-largest retail chain, shut down Express branch mid-February for undisclosed reasons, occasioning some employees to be declared redundant.
The family-owned business now has 54 stores across the country. The retailer in December 2013 lost its store next to the Fire Station along Tom Mboya Street in Nairobi to rival Eastmatt, with management attributing this takeover to failure to agree on lease terms with the landlord.
Tuskys’ row with its employees over jobs comes at a time when the country’s retailers are battling multiple challenges such as finance costs and mounting supplier debts that have resulted in stock outs, pushing some players into the red.
Research by Kestrel Capital shows that Kenya’s retail and grocery stores earn a return on sales of between one and three per cent, underlining the importance of cost containment, including salaries.
The retail industry’s fight to keep prime locations with high foot traffic is seen to exert pressures on their profit margins.
Nakumatt Supermarket, the market leader, similarly closed its Ronald Ngala Street branch in Nairobi, citing years of low sales from the downtown shop in a high cost business environment.
Atul Shah, the retail chain’s managing director, however promised to absorb all affected employees in their other outlets.
“Nakumatt is sometimes perceived as an expensive supermarket and its location was therefore not good for our business leading to its closure,” he told the Business Daily in an earlier interview.
Nakumatt has been facing financial challenges recently, and is currently working on a $75 million (Sh7.5 billion) deal to sell a 25 per cent stake to a strategic investor to retire its heavy debt burden.
The reported transaction values the business at about Sh30 billion.
Nakumatt, Tuskys and Naivas jointly owed suppliers Sh8 billion in unpaid dues in September last year. Some of the payments date back to early 2014, underlining the gravity of the problem.
The tough operating environment has pushed several supermarkets into losses including Uchumi and Ukwala, which was recently partly acquired by Botswana’s Choppies.