The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

AML Foods has secured a five-year lease extension for 50 percent less space at its Town Centre Mall-based Cost Right store while it waits for the fate of its new location to be determined.

Gavin Watchorn, the BISX-listed food group's chief executive, told Tribune Business that it will vacate the mall's upper level in January after the new lease deal bought time for the legal dispute surrounding the former City Markets head office and warehouse on East-West Highway to be resolved.

He disclosed that the lease extension will also see AML Foods relocate its corporate head office from the Town Centre Mall to a property it owns on Thompson Boulevard, with Cost Right also vacating the upper floor to solely occupy the ground level.

Mr Watchorn confirmed this will slightly narrow the product range carried by Cost Right as he signalled the group has not given up hope on realising its $3m investment in acquiring the former City Markets property.

"Our corporate offices are relocating in January," he told this newspaper. "We have a building on Thompson Boulevard, and we will be relocating there. We've also signed a five-year lease extension for about 50 percent of the space at Cost Right.

"It's just for the lower level space. By the end of January we will have exited completely the upper level we currently occupy." Acknowledging that there would be some "rationalisation" of Cost Right's product range as a result, he added: "We've begun to discard product items that are not big sellers, and don't provide the returns necessary. There will be a lower, but not significantly lower, variety of product downstairs."

Cost Right's lease at Town Centre Mall was due to expire in early 2020, and the extension gives AML Foods time to properly rebuild and fit-out the former City Markets property once the current battle over the sale proceeds is settled. One of the Town Centre Mall's owners, Craig Symonette, is also a prominent shareholder and director at AML Foods.

Mr Watchorn, meanwhile, confirmed that the City Markets dispute is due to be heard by the Supreme Court in April, but declined to comment further as the BISX-listed food group is not a party to it.

The litigation involves various groups connected with the City Markets employee pension fund, the site's owner, and relates to who should receive the proceeds from the AML Foods sale and how they should be distributed.

The AML Foods chief, meanwhile, also revealed that the ongoing uncertainty over the East-West Highway site was one factor behind the group's decision to pause plans to expand the neighbourhood food store concept begun by Solomon's Yamacraw as the property would also be used as a distribution centre to supply these outlets.

"Our Board remains focused on expanding in the neighbourhood food store market," Mr Watchorn added. "But given that our results have not met expectations, and the uncertainties around the hurricane, we need to make sure we have the right opportunities for the benefit of all constituents - our customers, associates and, most importantly, our shareholders."

He then revealed that AML Foods' gross margins had risen 4 percent due to reduced shrinkage and better purchasing/merchandising strategies that were introduced in the summer.

"That's a combination of some better shrinkage numbers as well as adjustments made to purchasing and merchandising strategies," Mr Watchorn told Tribune Business. "It's just helping us drive better efficiencies through the supply chain."

Confirming that the group-wide roll out of its new Enterprise Resource Planning (ERP) system will be completed by the end of February, with six out of eight stores now online, he said this will "give us more data to manage the supply chain more efficiently and effectively to serve customers better".

Mr Watchorn added that AML Foods was also focused on ensuring it had sufficient inventories to match consumer demand, as issues in this area had resulted in "missed opportunities" in the past.

"We just need to simplify what we do," he told Tribune Business. "In our striving to be better and different we perhaps over-complicated some of the things we do. We are on a major initiative company-wide to simplify what we do, remove complexities and make sure our processes and systems are designed around ease of execution and success of execution for our associates."

The AML Foods chief said the group's "net" Christmas performance was unlikely to match 2018's due to the loss of its Solomon's Freeport store on Queen's Highway due to Hurricane Dorian.