Nairobi Business Ventures, the fashion retailer operating the K-Shoe brand, has issued a profit warning, indicating that its profit for the financial year ending 31st March 2020 would to significantly lower than 2018.
“The board brings to the attention of the public that the earnings for the current financial year are expected to be lower by at least 25% than the earnings reported for the same period in 2018,” the company CEO, Mr Vasu Abotula, said in a note dated 26th March 2020.
Shoe String Budget
He said the announcement was based on the forecasted financial results of the group for the year ending 31st March 2020. In light of declining shoe business in particular and retail business in general, Mr Abotula said Nairobi Business Ventures has been working on a transaction and has focused on delivering on this initiative that will guarantee the viability of the company for the benefit of the shareholder.
Nairobi Business Ventures Limited (“NBV” ) was incorporated and registered in Kenya in March 2012. NBV’s main business is the retail of leather shoes and leather accessories. NBV started out as a distributor of shoes in Kenya through the brand name ‘Kwanza shoes’. These shoes were imported from China and India and branded in Kenya.
The Company later in 2013 changed the brand name from Kwanza to KShoe. The Company currently runs six (6) KShoe brand retail outlets at prime locations in Nairobi. The KShoe brand name is coined from “Kenya Shoe” with the ultimate aim of creating a brand that is entirely Kenyan.
Stores walking away
The company, which has been facing cashflow issues, last year lost more branches to landlords who seized its inventory over non-payment of rent arrears. This reduced sales and left its finances in disarray. According to auditors, the company lost Ksh21.5 million worth of goods after landlords confiscated two branches in the review period.
NBV had also lost inventory valued at Ksh55 million the year before when it lost three branches to landlords. “There were no other suitable audit procedures that we could adopt to verify the accuracy of values of stocks and fixed assets confiscated by the landlords in the absence of third party documentary evidence,” the auditors said.
NBV’s sales dropped to Ksh13.2 million in the financial year ending 31st March 2019 compared to Ksh18.1 million a year earlier but its net loss narrowed to Ksh34.7 million from Ksh76.5 million. The company’s negative equity worsened to Ksh36.2 million from Ksh31.5 million, partly due to loss of the shoe stocks.
NBV has suffered from inadequate working capital and has been relying on shareholders loans which have not been provided in due time. The auditors noted that NBV risks going out of business since “as at March 31, 2019, the company had a shareholders’ deficit of Ksh36.2 million (2018: Ksh31.5 million) as a result of loss in the current year and previous financial year.”
The fashion retailer’s share price has collapsed to trade below Sh1, having debuted on the NSE in June 2016 at Ksh5 per share.