500 jobs lost as supermarket chain shuts with $209m debts

The Guangnan (KK) supermarket chain unexpectedly shut down its 34 stores yesterday with the loss of more than 500 jobs, tightening the grip of ParknShop and Wellcome on the industry.

The chain reported losses of $145 million this year and has debts of $209 million. The closure leaves Wellcome and ParknShop with just one serious competitor - the 56-store CRC chain, owned by China Resources (Holdings).

Mainland-funded Guangnan (Holdings) founded the KK chain by buying 70 per cent of Kitty & Kettie Supermarkets in 1996.

Guangnan group chairman Ye Xuquan said the group had spent heavily on KK in the past six years, but business remained hampered by rental costs and a failure to agree on preferential terms with suppliers. The chain was bound to five-year leases, with high rents set during the property boom.

'Over the past six years, we have invested up to $222 million in KK,' Mr Ye said. Last year, Guangnan poured $90 million into the chain and had spent $41 million this year, he said.

Liquidator Ernst and Young was granted a court order to wind up the chain yesterday morning and said it would welcome offers for the supermarkets' assets. The closure came despite recent cost-cutting measures such as laying off 94 workers, pay cuts and restructuring to reduce overheads.

Five small KK stores will remain open on PLA bases.