Chain stores to lay off employees amid Covid-19 lockdown

LAHORE: Chain stores decided to lay off employees, closing the shops and cancellation of production orders as the losses are piled up into billions of rupees against almost Rs2000 billion worth inventories.

The chain stores closed after Covid-19 lockdown have placed their production orders for the summer and Eid season – the peak sales season of the industry- is stuck due to lockdown while the government is not ready to allow them to start business till mid of Ramazan when the lockdown is likely to end. Thus, the Chainstore Association of Pakistan (CAP) has been considering of cancelling all the pending production orders stuck in supply chain, laying off their staff and closing the rental shops from May 1, 2020.

CAP Chairman Tariq Mehboob while talking to The News said the association attempted to sensitise the government authorities about seriousness of the issue. However, no authority paid heed to the situation while the chain stores are unable to book further orders.

According to the government estimates, there are almost 50,000 chain sores operational in Pakistan, out of which 20,000 are of registered CAP members, almost 6,000 others with another platform. A chain store is attached with four different sectors, including import, production, distribution and retail. Parallel working of all these sectors make the chain store viable. The sector is generating almost 0.6 million employment which will be affected.

However, since the lockdown started, almost Rs1200 billion inventory is stuck with in their warehouses and godowns, besides almost Rs800 billion inventories in production supply chains ranging from import, production and distributions sectors.

Tariq Mehboob said in Pakistan majority of brands witnessed their 80 percent of business in March, April and May due to prolonged summer season. The textile sector producing men and women clothes have also registered maximum production output during this season. However, now all supply chain is stuck. Now even if the government allows the opening of chain stores from mid of Ramazan, even then these stores would be unable to do business properly as the inventory was stuck in production lines takes minimum 15 to 20 days to reach the stores. Now all Eid-related inventory is stuck in production lines and it could not reach on time in stores for sales.

Once the summer season would be missed then the brands could sustain to keep the stocks piled up in their inventories for whole one year for the next summer season, he said, adding that this will adversely affect the cash flow of the brands and chain stores and number of business which are running their business on bank credits will go bankrupt.

He said the supply chain is closed and all Eid-related orders are incomplete while the new production orders could not be placed until previous orders completed. Further, if a chain store remained closed it bore a monthly Rs10 to 150 million of labiality in shape of shops rentals, employees’ salaries, production lines costs, and working capital cost.

For how long one can sustain this monthly labiality, he questioned. Tariq further said goods owners of shops who are fewer in numbers are not asking the rentals while majority of the owners are asking for rentals and not ready to negotiate on it. On the other hand, the government authorities say the mutual dealing between the business and government have no interference in it. Further, relief on taxes and utilities, the government also refused to entrain by saying that the government could not work without this money.

In such a scenario, the CAP has considered to shut down shops, layoff the employees and cancel the production orders in supply chain at different stages from May 1, Tariq said, adding that they will announce it formally in a day or two.