12 February 2018

Kenya: Deacons to Close Four Shops in Consolidation Bid

Nairobi — Deacons East Africa is set to close about four stores this year as it seeks to consolidate its portfolio.

Among the stores to be closed include the Angelo store at the Junction Mall which will be converted into an F&F store, as well as the baby shop store also at the Junction.

Others include 4U2 store at the Capital Centre mall on Mombasa Road and a discount store at the Thika Road.

Chief Executive Muchiri Wahome says the move is part of the firms' reorganization plan.

"We are looking at the cost base, understanding what customers are looking for. I must say that competition is on the up, new brands are coming to the market so we have to respond to those requirements," Wahome told Capital Business.

The move comes even as it offloaded its Mr. Price franchise in Kenya to Mr. Price Group.

The listed fashion retailer also intends to focus on profit making brands and may dispose of loss-making arms that are not adding value to the overall business plans over the next five years, says Wahome.

Among the brands exiting includes the Angelo Shoe brand whose stores will become Adidas stores as well as the baby shop brand franchise whose model has been switched to open market instead of franchise buying.

"There has been a strategic decision to develop further the Deacons Brand across the East African region, bring it back to the market. So this is a year of consolidation in reorganizing the brand portfolio of the business in order to have a more stable revenue stream from these brands," he added.

The company posted a 244 percent increase in losses in the first six months of 2017 to Sh180 million compared to Sh52 million loss in the first half of 2016 attributed to the drought that led to the reduction of disposable income coupled with lack of consumer credit due to the interest rates capping that limited lending to the private sector.

The firm also blamed the reduction of footfall into malls by 60 percent due to the non-performance of major supermarket anchor tenants as 98 percent of their brands are situated in malls.

On the investment side, the planned online platform is expected to go live in 12 weeks, with the firm projecting to make about Sh10 million a year from the platform.

"What we are finding is that unless you have an E-commerce platform, then you are unable to actually market to the upcoming middle class, the younger 18 years to 24 years because they are consuming all their marketing materials online, even if they are not shopping online, they are consuming brands online, and therefore you must have a presence online," he noted.

Deacon's fashion brands include 4u2, Addidas, Angelo, Truworths, Babyshop, Bossini, F&F and LifeFitness brand.

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