MEGAMART Portmore is set to close on June 30, ending 27 years of operation at the retail chain’s first Jamaican store, with Chairman Gassan Azan describing the move as “a very hard decision” that could affect about 200 employees.

The closure will bring an end to operations at the 75,000-square-foot Portmore location, which opened in 1999.

Azan said the Portmore branch had been loss-making for some time and had been subsidised by the company’s Montego Bay operation before that store was devastated by Hurricane Melissa, which struck Jamaica on October 28 last year.

“It’s a loss-making store, so Montego Bay was subsidising it,” Azan told the Jamaica Observer in an interview Wednesday.

The closure forms part of what parent company Cost Club Limited described in a release shared with the
Observer as a “strategic consolidation” of operations into its Waterloo Road, St Andrew, and Mandeville, Manchester, locations as it seeks to strengthen the wider business and improve long-term sustainability.

“It’s a very hard decision for me,” Azan said in the interview.

The company described the Portmore location as “an important part of our history”, and thanked customers and employees for their loyalty and contributions over the years.

Azan said the decision was complicated by the fact that the Portmore and Montego Bay properties were tied together under one lease arrangement with several pension funds following the company’s earlier sale-and-leaseback transaction.

He said the 15-year lease arrangement on the properties was nearing expiration, creating additional uncertainty around future investment decisions.

“If we were to modernise Portmore, it would cost us US$3 million, maybe more, of capital to change out all the equipment and modernise the store,” he said. “You can’t do that with the type of lease left on the building.”

The Portmore outlet had already reduced its operating hours from 10:00 pm to 8:00 pm as part of earlier cost-cutting measures, Azan confirmed.

He said the company intends to relocate some workers across the wider group, though the final number has not yet been determined. The MegaMart network currently employs about 700 people, including roughly 200 at Portmore.

Azan pushed back against suggestions that PriceSmart’s entry into Portmore was the main reason behind the closure, saying the membership retailer “really hasn’t changed our numbers” and serves a somewhat different customer base.

Instead, he argued that Portmore’s retail landscape has shifted over time as more neighbourhood shopping centres emerged deeper into the municipality, reducing the need for residents to travel to a single large-format store.

“What I would tell you, in general, is that Portmore has become much more neighbourhood shopping-oriented,” he said.

Azan told the Observer that he still hopes to reopen in Montego Bay, but with a smaller footprint than the previous operation. He added that he currently has no timeline for when the western Jamaica location could resume operations.

He also pointed to online shopping and direct imports, particularly in non-food categories, as increasing pressures on large-format retailers.

“It’s very bittersweet for me to have to deal with this. But I guess it’s part of what’s going on. The advent of online shopping has a lot to do with it — more so than PriceSmart,” he said.

He argued that MegaMart’s large-format model depends heavily on non-food sales to support the cost of operating a 75,000-square-foot store.

“A lot of retailers in Jamaica don’t really want to speak about it. But I guarantee you, if you talk to a number of them, they’ll tell you that they’re having it hard,” he continued.

“It’s primarily the non-food areas that are suffering,” Azan said. “MegaMart’s operational costs are much higher than your average supermarket because of the amount of square footage that you’re operating and you’re expecting certain sales from your non-food area. And if those sales don’t materialise, you really don’t get the extra margin to cover the cost of running a store of that size.”

“So there are a number of dynamics at play that have triggered this.”

AZAN…it’s very bittersweet for me to have to deal with this.